The war between Israel and Hamas has so far not had a major impact on the global economy. But a wave of attacks against merchant ships in the Red Sea could change that in a big way.
The Houthis, an Iran-backed armed group that controls much of northern Yemen, have been using drones and missiles to target ships since Hamas attacked Israel on Oct. development that could hinder international trade and increase the cost of imported goods.
The Suez is an important artery for container ships and fuel tankers. Goods and fuel from Asia and the Middle East have traveled to Europe and the United States through the causeway since it opened in 1869. Britain and other world powers have fought wars and engaged in geopolitical intrigue in canal, controlled by Egypt today, for more than a century.
About 50 vessels pass through the Suez Canal a day, and recent data suggested that, as of Monday, at least 32 had been diverted, said Chris Rogers, head of supply chain research at S&P Global Market Intelligence. He noted that about 15 percent of Europe’s imports are transported by sea from Asia and the Persian Gulf, most of which pass through Suez.
Peter Sand, chief analyst at Xeneta, a shipping market analytics company, described the problems in the Red Sea and the canal as “a slow-burning disaster that really exploded over the weekend.” He added, “Everyone involved in global shipping, especially in supply chains connected by the Suez Canal, is trying to figure out where their goods are, where they’re going.”
US Defense Secretary Lloyd J. Austin III on Monday announced a new multinational force that aims to “jointly address security challenges in the southern Red Sea and Gulf of Aden, with the aim of ensuring freedom of navigation for all countries and strengthening regional security and prosperity.”
Companies that ship products such as toys and electronics from Asia in large container ships have also said they will stop sending vessels to the area. A ship belonging to one of those companies, Maersk, was attacked last week.
Maersk said on Tuesday that all its ships bound for the Red Sea will be diverted to Africa via the Cape of Good Hope “to ensure the safety of our crews, vessels and cargo of customers on board.” Until the route is safer to use, going around Africa will be “faster and more predictable outcomes for customers and their supply chains.”
The instability near the Suez Canal comes at a time when drought has forced operators of the Panama Canal, another critical link in global supply chains, to reduce the number of vessels that can use the waterway. that water.
About 12 percent of world trade goes through the Suez Canal, and 5 percent through the Panama Canal. When shipping companies avoid canals, they often spend millions of dollars more on fuel for ships that take longer routes.
Sailing from Asia to Europe via the Cape of Good Hope instead of the Suez Canal is a diversion that would lengthen the journey from Singapore to Rotterdam in the Netherlands by 3,300 miles, or nearly 40 percent.
Mr. Buhangin said going the Cape of Good Hope route could add about $1 million, or about a third, to the cost of a round trip from Asia to Europe. He added that some shipping rates have increased by 20 percent in recent days.
A portion of that additional cost may be passed on to consumers as inflation eases in the United States and Europe.
The attacks have appeared to push up oil prices. Brent crude, the international oil benchmark, is up about 5 percent from its low earlier this month.
The economic impact has increased pressure on the United States and other countries to stop Houthi attacks. Shipping executives say such a force is needed.
“If you close the Suez Canal, it will have some big ripple effects,” said Oystein Kalleklev, the chief executive of Avance Gas, which transports propane from the United States to Asia. “So, we would think that there would be enough naval ships to stabilize the situation.”
Just over two years ago, the Suez Canal was the source of another supply chain scare. One of the largest container ships ever built was stuck for days in the canal, preventing other vessels from crossing. That episode occurred when supply chains were overwhelmed by the huge demand for furniture, electronics and other goods during the pandemic.
In comparison, the current Red Sea attacks are occurring during a relatively relaxed period of demand. As a result, S&P’s Mr. Rogers said in an email, their impact will be limited “if the disruption lasts days rather than weeks or months.”
Delays in the Panama Canal have prompted some shipping companies that bring goods from Asia to the East Coast of the United States to send ships through the Suez Canal instead. But problems in the Red Sea may now force them to go around the Cape of Good Hope, making those voyages even longer.
Unlike the Suez Canal, the Panama Canal uses locks, which lift ships up and down as they cross from one ocean to another. The lack of rain reduced the amount of water available to fill the locks, and the Panama Canal authority had to reduce the number of ships using the waterway. That number may drop further as the drought is just beginning.
“The Panama Canal situation,” said Mr. Kalleklev, is not “going to end anytime soon.”
