Attacks in the busy waterway are an act of solidarity with the Palestinians in Gaza and they are targeting ships with links to Israel
Houthi Group of Yemen
Let our message now be clear: we call for the immediate end of these illegal attacks and the release of unlawfully detained vessels and crews
White House statement on Red Sea attacks
Overview
Since the tensions have escalated in the Middle East, the effects are expanding by every passing day. While the Israel-Hamas conflict has turned the lives of innocent civilians of Gaza into a living hell, the Houthi attacks in the Red sea taking the world toward another war and trade crisis. As we know the world is a Global village and no matter in which region the problems occur they affect the whole world. After COVID-19, the world economies were reviving and things were finally getting into order but unfortunately, the Russia-Ukraine war began. Russia was smashed with sanctions, but, since Russia is the largest natural gas exporter along with other energy supplies, sanctions backfired and the Energy crisis in Europe Began.
But, things don’t stop here, Rising international oil and commodity prices have impacted households day to day lives drastically, from electricity to commodities everything’s prices surged. Things aren’t calm and another unfortunate event occurs and this will surely have lasting effects
The tensions aren’t new but it’s like lava erupted, The Israel-Palestine issue has been always a big concern for the Middle East peace, but on October 7th, Hamas the militant group that has a controversial history attacked Israel, against that attack Israel Bombed the Gaza strip heavily which has almost flattened the infrastructure of Gaza and killed hundreds of thousands of civilians. After ignoring the ceasefire calls from the world Israel continued bombardment and then Yemen came onto the scene
Houthi attacks on the Red Sea and its impacts on world trade
Houthi group is the rebel group in Yemen, said to be backed by Iran and recognized internationally has control over almost all of Yemen, they decided to disturb Israel’s trade from the Red Sea until they allow humanitarian aid to enter Gaza. Attacks started and Houthis detained several shipping vessels in the Red Sea these attacks have surged by 500 percent since November, 2023
The Red Sea has a significant standing in handling 15% of the world’s shipping traffic and 30% of the container traffic of the world, moreover, 12% of the world’s oil trade passes through this route, and 8% of the natural gas. According to the US Energy Information Administration, 8.8 Million Barrels of oil and 4.1 Billion Cubic Feet of LNG pass through this route every day. Furthermore, almost 40% of the jet fuel requirements of Europe are fulfilled by this route. Overall, Trillions of Dollars in trade and 1/3rd of world oil trade or 12% of total trade takes place through the Red Sea and Suez Canal. With such geographic significance, Houthis played this strategically to pressure the world for a ceasefire in Gaza and access to supply humanitarian aid
Concern for major shipping companies of the world
The shipping companies have serious concerns over this ongoing crisis, as vessels have been attacked by drones and missiles and are detained, and companies are forced to divert the routes to costlier alternatives. More than 300 ships have been rerouted to Cape of Good Hope, they need to travel thousands of extra nautical miles to reach destinations. The crisis is more severe for the countries near the Suez Canal such as; Turkey, Greece, and Italy. As Houthis are targeting Israeli-linked ships, many vessels have rejected any links
The major shipping companies that have shifted their routes Include Germany’s Hapag Lloyd, Denmark’s Maersk, Logistics Group C.H. Robinson, French group CMA and CGM, etc. While, Denmark’s Maersk has 15% of the world market share, and Germany’s Hapag Lloyd has over a Quarter of the world’s shipping market share. French shipping claims that the increase in transportation due to rerouting will be 100%. Moreover, It’ll increase shipping time by 14 days and over $1 Million in cost. The extraordinary increase in cost will significantly affect commodities from Jet fuel to Household staples
US response to Houthi attack in the Red Sea
The US Navy recently responded to a rescue request from a Maersk shipping line vessel from Houthi attacks, they claim to have destroyed three ships of Houthis and neutralized multiple Houthi militants. The US asked Iran to pull Houthis back but Iran disowned any connections from attacks going on in the Red Sea. The US along with its 12 allies planning to tackle the situation by bombardment on Yemen, while the UK has already taken the matter to parliament but has yet to make a final decision
Conclusion
As the world’s biggest shipping line have rerouted their vessels to costlier routes, it indicates that there is no quick solution to this emerging crisis and countries should be prepared to tackle another wave of inflation. The Western region can be highly affected because since the Russia-Ukraine war Europe is fulfilling its oil requirement completely from the Middle East, and another surge in prices will have drastic effects. Moreover, household staples prices surge will increase the day-to-day cost of living. Ultimately have a snowball effect that can harm the economic condition of multiple nations in the world
