Tension escalated in the Red Sea after ships were attacked while crossing the vital path that links Europe to the Arabian Gulf and Sea, all the way to East Asia, raising fears of new disruptions in global trade, including energy supplies.
On Sunday, the Pentagon said a US warship and three commercial ships were attacked off the coast of Yemen, raising concerns that the Houthis, who targeted Israeli ships last month, are expanding their campaign in response to the war in Gaza.
US National Security Advisor Jake Sullivan said on Monday that the attacks were “totally unacceptable,” adding that the United States was in talks with other countries about forming a naval task force to ensure the safe passage of ships in the Red Sea.
US Central Command said it was studying “appropriate responses” to the attacks that endangered the lives of crews from several countries, as well as threatening international trade and maritime security. It added that although the attacks were carried out by the Houthis, they were “fully enabled by Iran.”
This new threat to shipping - which could affect trade from crude oil to vehicles - comes following major pressures on supply chains due to the Covid-19 pandemic and the Russian war in Ukraine, which increased inflation and led to a global economic slowdown.
“The Red Sea route matters,” Henning Gloystein at consultancy Eurasia Group told the Financial Times.
“It matters even more for the Europeans, who get all their Middle Eastern oil and LNG through the Red Sea,” he added.
Since 2019, the Houthis and other suspected Iranian proxies have attacked multiple ships in the Middle East, seized oil tankers and launched attacks using limpet mines attached to their hulls, according to a report by the Financial Times.
“The oil market has become too complacent about risks that the Gaza conflict will expand regionally and threaten oil and gas infrastructure and shipping in the Red Sea and Gulf,” Bob McNally, founder of Rapidan Energy and a former adviser to the George W Bush White House, was quoted as saying.
McNally added that material interruption in regional energy flows could reach 30 percent.
Ship-owners are now exploring safer, but more expensive, alternative routes and are demanding greater protection in Middle Eastern waters. An alternative route involves going around the Cape of Good Hope, near Cape Town, and sailing along West Africa, a much longer and more expensive path.
According to the Financial Times report, ship-owners are already having to pay more for insurance, as well as diverting vessels and investing in additional security measures.
Marcus Baker, head of marine at insurance broker Marsh, said that some insurers had already increased rates during the week before Sunday’s Red Sea attacks, in one case by as much as 300 per cent. He added that the market “is going to have to react” to the latest incidents.
