Following targeted attacks by Houthi militants on commercial shipping vessels in Yemen, major shipping companies have made strategic changes to their cargo sailing routes, steering clear of the Red Sea. These alterations have been prompted by concerns for vessel safety and security in the wake of escalating conflicts in the region.
The Houthi group’s attacks, which escalated in support of Hamas at the start of the Israel-Hamas war in October, employed drones and rockets targeting foreign-owned vessels navigating through crucial trade routes, namely the Bab al Mandeb and Suez Canal. These routes serve as vital links between the Mediterranean Sea and the Indian Ocean via the Red Sea, facilitating about a third of all worldwide container ship voyages.
As a direct consequence of vessels being rerouted, oil prices have seen a significant surge. In the first trading session of the new year, Brent crude reportedly rose by 2% to $78 (£62) per barrel, while US West Texas Intermediate crude stood at $73 (£58).
BP announced a cessation of oil and gas shipments in December due to the escalating attacks. Germany’s Hapag-Lloyd quickly followed suit, rerouting several ships around Africa’s southern Cape of Good Hope “until the Red Sea is deemed safe for vessels and crews.” Maersk has also suspended transits through the Red Sea and the Gulf of Aden after one of its large carriers, the Maersk Hangzou, was targeted in the attacks.
The decision by shipping companies to reroute vessels around Africa to ensure safety adds significant costs and delivery delays, with voyages taking anywhere from seven to 20 days longer.
The repercussions extend beyond the shipping industry, impacting consumers. Swedish furniture giant IKEA has issued warnings about potential delays in deliveries and reduced product availability.
Furthermore, alongside the oil price surges, reports indicate there has been a 4% increase in shipping rates over the past week. This rise may prompt businesses to pass on these increased costs to customers, potentially affecting consumer prices across various sectors.
