Houthi attacks threaten global trade

Attacks by Iran-backed Houthi militants on ships in the Red Sea have already rocked global trade. And there could be more disruptions and price increases to come for shipments of goods and fuel.

Several major shipping lines and oil transporters have suspended their services through the Red Sea as more than a dozen vessels have come under attack since the start of the Israel-Hamas war in early October.

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.

On Monday, oil giant BP said it would also pause shipping activity in the Red Sea as the Yemen-based Houthis continue their attacks.

Insurers are also shifting their stance, which could result in higher costs passed on to shippers and consumers. The Joint War Committee (JWC), which includes syndicate members from the Lloyd’s Market Association and representatives from the London insurance company market, said it is widening its high-risk zone to 18 degrees north from 15 degrees north.

The attacks have already pushed ocean freight costs higher. Since the beginning of the Israel-Hamas war, the Asia-U.S. East Coast prices climbed 5% to $2,497 per 40-foot container, according to the Freightos. 

It could get even more expensive as major companies avoid the Suez Canal, which feeds into the Red Sea, and opt instead to go around Africa to get to the Indian Ocean.