In a response to the recent spate of attacks by Yemen’s Houthi militants on ships in the Red Sea, the United States is spearheading efforts to build an international coalition. The assaults have not only disrupted maritime trade but have also led to a rerouting of freight around Africa to bypass the Suez Canal.
Houthi Strikes Prompt U.S. Coalition Building
The Houthi group claimed responsibility for a drone attack on two cargo vessels, citing retaliation for Israel’s actions in the Gaza Strip. U.S. Defense Secretary Lloyd Austin, during his visit to Israel, announced the formation of a coalition to address the Houthi threat. Virtual talks involving defense ministers from the region and beyond are set to take place this week.
Risk Insurance and Global Response
War risk insurance premiums are on the rise, and some major players, including BP and Frontline, are temporarily halting transits through the Red Sea. The crisis is expanding to include energy shipments, with crude oil prices seeing an increase. NATO states, has expressed readiness to contribute naval officers to the U.S.-led task force.
Geopolitical Influence and Economic Fallout
Despite Houthi claims of targeting only Israeli-linked vessels, however the scope of their attacks extends beyond. The shipping diversions are expected to result in slower shipments, potentially leading to higher prices for consumers. Delays in late December may have cascading effects into January and February, impacting the supply of consumer goods, particularly ahead of the Chinese New Year.
Shipping Giants Altered Routes
About 15% of world shipping traffic passes through the Suez Canal, but major freight firms, including MSC, are now opting for the longer route around Africa. This shift is already adding costs and delays, with industry analysts predicting further complications in the coming weeks. London’s marine insurance market has expanded the high-risk area in the Red Sea, leading to increased premiums for ships.
Image;BBC
In response to heightened security concerns, other major shipping firms have also altered their routes. Evergreen Line, one of the world’s largest shipping companies, announced the temporary suspension of cargo transportation through the Red Sea. The Houthi rebels’ targeting of ships passing through the perilous Bab al-Mandab Strait has forced vessels to take longer routes, circumnavigating southern Africa around the Cape of Good Hope and potentially adding about 10 days to their journeys, incurring substantial costs.
Source:BBC and Reuters