Just last month, I wrote about the challenges facing the shipping industry, as climate change continues to intensify windstorms, rain events, desertification and drought. Now, the Israel-Hamas war and its ensuing violence are once again threatening cargo ships and global trade. The Houthis, an Iran-backed militia in Yemen, have for the past month been firing drones and missiles at vessels crossing the Red Sea in response to Israel’s attacks on the Gaza Strip.
In fact, Reuters reports that the Houthis have threatened to “target all ships heading to Israel,” with dozens already having been attacked since the war began. In response, major shipping lines and oil transporters have suspended service through the Red Sea, creating disruptions and increasing prices on goods and fuel, according to CNBC: “MSC, Maersk, Hapag Lloyd, CMA CGM, Yang Ming Marine Transport and Evergreen have all said they will be diverting all scheduled journeys immediately to secure the safety of their seafarers and vessels. Collectively, these ocean carriers represent around 60% of global trade. Oil companies BP and Frontline are following suit.”
This week, I spoke to KNX News in Los Angeles about the threats to supply chain caused by these attacks: “About 12-15% of global trade passes through the Red Sea and about 30% of global container traffic. … But whether it be the Suez Canal or the Panama Canal or an environmental disruption, global supply chains are so interconnected, so the disruption will have collateral impact.”
According to The Wall Street Journal, if tankers can’t pass through the Red Sea, this will redraw the global oil market for the second time in two years, after the war on Ukraine and related sanctions forced Russia to find new markets for its petroleum. In fact, costs are already rising as a result of the rerouting and overall threat of attack: Prices climbed 5% to $2,497 per 40-foot container. And Brent crude futures, the global benchmark, rose about 2% to about $78 a barrel in trading this Monday. The Pentagon has pledged to protect ships travelling in the region, but this is still a huge international problem.
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