What to Know:
Major shipping companies have announced the suspension of transits through the Red Sea, citing security concerns, as Houthi forces continue to target commercial maritime vessels in the region.
Who is Involved:
As of Monday, shipping companies A.P. Moller–Maersk, Mediterranean Shipping Company (MSC), CMA CGM, Hapag-Lloyd, Evergreen Shipping, and BP Shipping have all announced the suspension of transits through the Red Sea to the Suez Canal.
Economic Impact:
Marsk, MSC, CMA CGM, and Hapag-Lloyd alone make up more than half of the global container capacity and a majority of the Suez Canal’s container capacity. Roughly 12 percent of all traded goods, worth an estimated $1 trillion, pass through the Suez Canal annually. With this, most vessels will likely be re-routed around Africa’s Cape of Good Hope, extending voyage times by about two weeks and, in turn, increasing freight rates that can impact prices on the consumer end.
Likewise, roughly 10 percent of the world’s oil and 8 percent of the world’s liquefied natural gas (LNG) pass through the canal annually. LNG prices have already spiked since the war broke out between Israel and Hamas on October 7 with the shut down of the Chevron Tamar platform, but increased transit suspensions by oil and gas companies would likely lead to a greater spike in prices this winter.
Context:
The Houthis, which are backed by Iran, have repeatedly warned that any vessel linked to Israel, whether it be their owner, operator, or port of call, will be viewed as military targets. Likewise, the group has also added that they will continue attacks until Israel stops military operations in Gaza.
Since November, Houthis have disrupted shipping in the region by diverting, attacking, and hijacking commercial shipping vessels. On November 19, the Bahamian-flagged roll-on/roll-off (RoRo) vessel “Galaxy Leader” was hijacked by Houthi forces and brought to Yemen. Likewise, several other commercial tankers have been struck by Houthi missiles and drones in recent weeks, resulting in damage but no reported casualties amongst the crew.
Response:
The attacks have drawn in greater involvement from international military forces, mainly the United States, where the Arleigh Burke-class destroyers USS Carney and USS Mason have intercepted dozens of Houthi projectiles while stationed in the Red Sea and responding to distress signals from said attacks against commercial vessels.
This also comes amid unconfirmed reports fromPolitico that the US is weighing its options to deter Houthi attacks, such has carrying out strikes on Houthi targets inside of Yemen.