๐ก๐ฒ๐ ๐ฑ๐ฒ๐๐ฒ๐น๐ผ๐ฝ๐บ๐ฒ๐ป๐ ๐ถ๐ป ๐๐ต๐ฒ ๐ฅ๐ฒ๐ฑ ๐ฆ๐ฒ๐ฎ
This post will discuss the developing situation in the Suez Canal region.
๐๐ป๐ฐ๐ฟ๐ฒ๐ฎ๐๐ฒ๐ฑ ๐ฎ๐๐๐ฎ๐ฐ๐ธ๐ ๐ผ๐ป ๐ฐ๐ผ๐บ๐บ๐ฒ๐ฟ๐ฐ๐ถ๐ฎ๐น ๐๐ฒ๐๐๐ฒ๐น๐ ๐ถ๐ป ๐๐ต๐ฒ ๐ฅ๐ฒ๐ฑ ๐ฆ๐ฒ๐ฎ. This is attributed to increased attacks on commercial vessels in the Red Sea by Houthi militants from Yemen. These attacks have prompted major shipping firms, including MSC, the world's biggest container shipping line, to decide against using the Suez Canal route. The Houthi movement, aligned with Iran, has increased these attacks in response to the Gaza war, affecting the major East-West trade route and causing a spike in war risk insurance premiums.
One of the incidents involved the Liberian flagged MSC Palatium III, which was attacked with a drone in the Bab al-Mandab Strait off Yemen, resulting in fire damage. Another vessel, Hapag Lloyd's Al Jasrah, was hit by a missile. In response to these escalating threats, Denmark's A.P. Moller-Maersk, Swiss-based MSC, and French shipping group CMA CGM have paused or are considering pausing their container shipments through the Red Sea. Hapag Lloyd also indicated it might follow suit.
These attacks are not only on shipping vessels but also include Houthi drone and missile attacks towards Israel, specifically targeting the Red Sea resort city of Eilat. The U.S. Central Command reported shooting down several attack drones launched by the Houthis in the Red Sea, and the British navy has engaged a suspected attack drone targeting merchant shipping.
The Houthis have expressed their intentions to continue attacks until Israel ceases its offensive, claiming to target only ships heading for Israel. However, data from MarineTraffic indicated that some of the threatened vessels were actually bound for Jeddah in Saudi Arabia. The Bab al-Mandab Strait is a critical global route for seaborne commodity shipments, especially crude oil and fuel. The rise in Red Sea war risk premiums has translated into significant additional costs for shipping companies.
As a result of these developments, MSC announced plans to reroute some of its services around the Cape of Good Hope, which will add several days to the usual sailing times for vessels that would have transited the Suez Canal. This shift could have a substantial impact on global shipping rates and supply chains, with the possibility of rates increasing significantly due to the extended voyage times and additional risksโ.
The timing of the recent shipping disruptions in the Suez Canal due to Houthi attacks is particularly concerning in the context of the global economy and inflation trends. Prior to these events, there was a growing confidence in the market regarding the potential for falling inflation, largely spurred by recent remarks and actions from the Federal Reserve. These remarks had likely fostered a sense of optimism about stabilizing prices and a recovering economy.
However, the sudden escalation of risks in one of the world's key shipping lanes threatens to undermine this optimism. The rerouting of ships away from the Suez Canal and the associated increase in transit times and costs could lead to a rise in the prices of goods. This is because longer shipping routes like the Cape of Good Hope significantly increase fuel usage and transportation time, directly impacting shipping costs. These higher costs can then trickle down to consumers.
The attacks in the Suez Canal region present a new challenge to the global economic recovery, which have been developing in response to the Gaza war, requiring major countries with a vested interest to increase security in the area.
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