Crude Oil Supply Chains Affected By Red Sea Attacks

London: 18 December 2023 (TraderMade): Escalating attacks by Yemeni Houthi rebels on Red Sea ships force major shipping companies to bypass the Suez Canal and sail around Africa, causing ripple effects across global supply chains.

The latest incident

On Monday, Houthi militants fired at a vessel in the southern Red Sea, adding to a string of missile and drone attacks targeting ships in the area. The group claims these attacks are retaliation for Israel's assault on Gaza.

Red Sea Houthi attacks trigger shipping chaos as giants like MSC reroute around Africa, ballooning costs and adding a week to deliveries. Prepare for delayed, pricier goods as this detour impacts half the global container market and threatens widespread supply chain woes.

Wider context

These attacks ripple beyond shipping, hitting oil giants like BP with suspended operations. These attacks are entangled in the Israel-Hamas conflict, fueling the fire -drawing in the US and Iran and raising fears of broader escalation. The US and allies consider a Red Sea security force, a move met with Iranian opposition, adding another layer of tension to the volatile region.

Investors saw an opportunity in the Red Sea shipping turmoil, driving European companies' stocks up in anticipation of higher freight rates with the Suez Canal bypass.

Though Egypt faces potential revenue loss from the canal dip, the considerable impact on supply chains is expected to linger into next year, even if cost increases remain somewhat muted compared to pandemic extremes.

The International Chamber of Shipping urges naval forces to intervene and stop the Houthi attacks, protecting vital international trade routes.