To reach the Indian Ocean from the Suez Canal, one must pass through the Bab al-Mandeb Strait. The onset of the Gaza war and the absence of a ceasefire have led to a rise in Yemen attacks on commercial ships. Additionally, the global supply chain from the Red Sea has been significantly disrupted. Consequently, many companies have opted to avoid the Bab al-Mandeb Strait. This article explores the reasons behind the increased sea transportation costs following the Gaza war.
Houthi attacks on commercial ships
The Houthis are controlling most of the northwestern regions of Yemen. They have been attacking merchant ships in the area since November. The Houthis say Israel must stop killing the people of Gaza. According to them, they will have a military presence as long as Israel continues to kill the people of Gaza. The Houthis say that they carry out these attacks in solidarity with the people of Gaza. The military targets of the Houthis are limited to ships associated with the United States and England. According to the Houthis, these two countries are prominent supporters of Israel.
Increase in Yemen attacks in the Red Sea from October 2023
The Houthis have increased their attacks since the start of the Israel-Hamas war. This group is against foreign ships that transport goods to Israel through the Bab al-Mandab strait. A 20-mile-wide canal that separates Eritrea and Djibouti on the African side from Yemen on the Arabian Peninsula. Ships usually take this route from the south to reach Egypt’s Suez Canal in the north.
The importance of the Suez Canal in global transportation
The Suez Canal is the fastest sea route between Asia and Europe. The Suez Canal is essential in transporting oil and liquefied natural gas (LNG). 9.2 million barrels of oil per day have been shipped through the Suez Canal in the first half of 2023. Nearly 15% of imports from Asia to Europe, the Middle East and North Africa are transported by sea. This export includes 21.5% of refined oil and more than 13% of crude oil. These statistics are called S&P Global Market Intelligence analysts. But it’s not just about oil. Container ships carry a variety of consumer goods found in stores, including televisions, clothing, and sports equipment.
Shipping disruptions with the escalation of Houthi attacks
Political observers say that rising transport and insurance costs and delays in cargo arrivals are also disrupting global value chains. The countries of Asia, Africa, and Europe have faced the most disruptions. In this regard, confectionery companies have experienced high prices and shortages of cocoa due to late delivery from Africa. Delay in delivery has reduced their profits. The textile and leather industries are also renegotiating freight charges with buyers, affecting their earnings. Car manufacturers also use different transport routes to avoid delays.
Changing the route of shipping companies in the Red Sea
Due to the attacks in Yemen, several major shipping companies have changed their routes. Mediterranean Shipping and Maersk, for example, have been diverted on a longer route around Africa’s Cape of Good Hope. BP has stopped all oil shipments through the Red Sea and called it the “worsening security situation.” Longer trips add at least ten days to transit time, costing companies millions of dollars.
The impact of the Red Sea conflicts on Indian trade
The Red Sea route has been used for 113 billion dollars of merchandise trade with Europe and North Africa. The World Bank report shows the significant impact of Yemen’s attacks in the Red Sea on India. India heavily depends on the Bab al-Mandab Strait for crude oil and LNG imports and trade with critical regions. Due to tensions, about 65% of India’s $105 billion crude oil imports will pass through the Suez Canal.
Reducing the world’s container shipping capacity
The Yemen attacks have particularly affected the Suez Canal routes, which now handle about 30 per cent of global container trade. Ships are now forced to round the Cape of Good Hope in Africa. Therefore, the shipping time of vessels has increased by 30%. Also, the global container transportation capacity has decreased by about 9%. Conflicts in the Red Sea have also increased shipping costs by 40 to 60 per cent. On the other hand, it has increased the insurance premium by between 15 and 20 per cent. These tensions have caused a delay of 20 days or more in the transportation of goods due to the change of route.
The negative impact of the Red Sea conflict on British trade
More than half of Britain’s export jobs have been affected by shipping disruptions on vital trade routes along the Red Sea. This statistic is based on a survey by the British Chamber of Commerce. Accordingly, the Red Sea turbulence has affected around 53% of UK manufacturers and business services companies. According to BCC research, this figure rises to 55% of UK exporters. More than half of Britain’s export jobs have been affected by shipping disruptions on trade routes along the Red Sea. This statistic is based on a survey by the British Chamber of Commerce. Accordingly, the Red Sea turbulence has affected around 53% of UK manufacturers and business services companies. According to BCC research, this figure rises to 55% of UK exporters.
The impact of the Red Sea conflict on British companies
Yemen attacks have forced many ships to reroute due to safety concerns, lengthening delivery times, and increasing shipping costs. A survey of over 1,000 businesses with fewer than 250 employees. According to this survey, about 37% of companies have felt the impact of this situation in the Red Sea.
Solving the Red Sea crisis requires comprehensive international cooperation.
The IMF announced a 50% decrease in trade volume through the Suez Canal. This decrease occurred in the first two months of this year. Also, the business around the Cape of Good Hope has increased by 74% compared to last year. International relations experts say that this crisis urgently needs comprehensive international cooperation. The recent tensions in the Red Sea have significantly affected the global oil and gas and transportation markets. Many companies have been forced to re-evaluate their supply chain strategies. This is due to increased Yemen attacks in the Red Sea and retaliatory airstrikes by the United States and Britain.
