Ships in the Red Sea have been repeatedly targeted by missile and drone attacks from Yemen, disrupting a key global transport route.
The Iranian-backed Houthi rebel group, which controls much of Yemen, attacked pro-Hamas ships off the coast during the war with Israel in the Gaza Strip.
The ships targeted also include oil tankers, raising fears that fuel and energy prices could skyrocket. American, British and French ships foiled several attacks by shooting down drones launched by the Houthis.
While they have so far caused little damage, the airstrikes have eased and threaten to cripple a key international trade route – with some companies withdrawing their ships from the Red Sea.
Here’s what’s happening and the potential impact it could have on the economy and consumers:
Who attacks ships in the Red Sea?
Houthi rebels in Yemen. Backed by Iranian weapons, they carry out attacks in support of Hamas militants fighting Israel in the Gaza Strip. The Houthis, who control much of Yemen, say they are attacking ships believed to be heading to Israel. But experts say attacks are becoming increasingly indiscriminate.
Which ships were attacked and where?
Missile and drone attacks have targeted commercial vessels in the Gulf of Aden and the Red Sea, including oil tankers.
Between Djibouti in East Africa and Yemen, at the foot of the Arabian Peninsula, lies a narrow waterway 32 kilometers wide – the Bab el-Mandeb Strait. Ships from Asia carrying goods to the UK and Europe via the Suez Canal must pass through the waterway, making it one of the busiest routes in the world.
Why is the Red Sea important?
Trade experts say more than a sixth of all manufactured goods imported into Britain and Europe, from cars to refrigerators, toys and kitchen appliances, arrive by sea from Asia and the Gulf, with the bulk going through the Red Sea and Suez. Channel.
It’s important to note that this represents 21.5 percent refined oil and more than 13 percent crude oil.
What are shipping companies doing about the attacks?
The frequency of attacks has led some companies to stop supplies or reroute their ships to avoid the Red Sea and around Africa via the Cape of Good Hope.
Some, such as oil and gas company BP, have stopped supplying. Others, such as Denmark’s Maersk, the world’s second-largest merchant shipping group, have decided to reroute some ships around Africa, extending their journey by more than 3,000 nautical miles and 10 days or more.
Maersk said one of its container ships was attacked by a missile en route between Oman and Jeddah in Saudi Arabia, but was not damaged. “Re-routing ships through the Cape of Good Hope will ultimately deliver faster and more predictable results for our customers and their supply chains,” the report said.
Future sailings through the Red Sea region will be assessed on a case-by-case basis to determine whether adjustments are necessary, the shipping company said.
How can we influence fuel and energy prices?
When BP announced it would suspend supplies to the region, the price of Brent crude rose nearly 2 percent to nearly $79 a barrel. Natural gas prices temporarily rose 13 percent.
But experts stress that while attacks on shipping add insurance against risk, they are unlikely to have a major impact on oil flows unless the Houthis attack key production facilities, as they did in March 2022 when their missiles hit a Saudi plant for the production of liquefied natural gas. .
Will attacks in the Red Sea contribute to inflation?
As the pandemic has shown, disruption to supply chains can be costly for consumers. Rising oil prices could lead to higher inflation. Inflation in the UK has fallen and currently stands at 4.6 percent. Britain will find out on Wednesday whether the rate has been cut further. This could easily be affected by rising energy prices.
The higher cost of transporting goods across Africa will affect inflation and make it less likely that the Bank of England will cut interest rates.
The attacks have also prompted insurers to increase risk coverage for ships traveling in the region. This increase applies to the companies whose goods are transported and, ultimately, to the customers who buy them.
The Joint War Committee (JWC), made up of members of the Lloyd’s of London insurance market, says the cost of shipping goods across the Red Sea has risen in recent days, with war risk premiums rising to around 0.5-0. over the past week has increased by 7 percent.
What is the military response?
Washington introduced a multinational naval force to protect merchant ships in the Red Sea. The Pentagon says it is launching a security operation to protect road traffic from missile and drone attacks. Operation Prosperity Guardian will involve the UK, Bahrain, France, Norway and other countries.
“We welcome joint efforts on international maritime security and capacity building in the region to find a solution that will enable the return to the Red Sea, Gulf of Aden and Suez Canal in the near future,” Maersk said. statement. It says ships will still be paused or veered to the side.
In response, the Houthis warned countries involved in the security operation that “the Red Sea will become your graveyard,” adding: “We have the weapons to sink your aircraft carriers and destroyers.”
Are there other risks for shipping worldwide?
The attacks on the Red Sea came at a time when another major trade obstacle, the Panama Canal, was forced to limit the number of cargo ships passing through it as drought led to lower water levels.
Trade ships using the canal are forced to travel longer routes and pay higher freight costs to avoid congestion and high transit costs, traders and analysts say.
Source: I News
I am Moises Cosgrove and I work for a news website as an author. I specialize in the market section, writing stories about the latest developments in the world of finance and economics. My articles are read by people from all walks of life, from investors to analysts, to everyday citizens looking for insight into how news will affect their finances.