Global Economy Threatened As Israeli War On Gaza Impacts Shipping In Red Sea

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Shipping and logistics majors A.P. Moller-Maersk, Hapag-Lloyd and MSC have stopped their ships from entering the southern entrance of the Red Sea after their vessels were attacked by the Yemeni Houthis (Ansar Allah) in response to the Israeli war and blockade on the Palestinian Gaza Strip.

Maersk and Hapag-Lloyd both announced their decision to halt shipping operations in the southern Red Sea on December 15.

In a statement, Maersk said its decision comes after a near-miss incident involving its Maersk Gibraltar ship on December 14 and another attack on a container vessel on the next day. The company instructed all Maersk vessels in the area bound to pass through the Bab el-Mandeb Strait to pause their journey until further notice.

“We are deeply concerned about the highly escalated security situation in the southern Red Sea and Gulf of Aden,” Maersk said in a statement. “The recent attacks on commercial vessels in the area are alarming and pose a significant threat to the safety and security of seafarers.”

Meanwhile, Hapag-Lloyd spokesman Nils Haupt said on December 15 that some of the company’s ships were asked to pause and drift outside the strait, a narrow stretch of water that links the Indian Ocean to the Red Sea. It’s also a key passage that enables ships to travel to Egypt’s Suez Canal.

Hapag’s Al Jasrah vessel was hit by an unknown object earlier in the day while traveling through the strait, according to Haupt.

“It’s very worrisome because ships heading to the Suez have to pass through the strait,” Haupt said. “We are stopping some ships, but there is no general rule yet, though this could change.”

MSC, the world’s largest shipping carrier, joined the two on December 16, announcing that its vessels will no longer be traveling through the Suez Canal after its container ship, the MSC PALATIUM III, was attacked a day earlier while transiting the Red Sea under a subcharter to Messina Line.

“Due to this incident and to protect the lives and safety of our seafarers, until the Red Sea passage is safe, MSC ships will not transit the Suez Canal Eastbound and Westbound. Already now, some services will be rerouted to go via the Cape of Good Hope instead,” MSC said in an advisory.

The company explained the new routing will impact the sailing schedules by several days for vessels booked for Suez transit.

“We ask for your understanding under these serious circumstances,” the advisory continued.

The Houthis, who control much of Yemen’s Red Sea coast, are a part of the so-called Axis of Resistance that is backed by Iran and opposes Israel. The group has fired several missiles and drones at the southernmost Israeli city of Eilat since the war broke out in Gaza. It has also assaulted a number of Israeli-owned ships.

Earlier this month, the Houthis announced that they will start targeting any ship passing through the Red Sea en route to Israel, regardless of whether the ship’s ownership is linked to the country, in response to the Israeli blockade on Gaza. Several vessels were later targeted near the Bab el-Mandeb Strait by the group.

The Bab el-Mandeb Strait is located between the Horn of Africa and the Middle East. It connects the Red Sea to the Gulf of Aden and the Arabian Sea, which feed into the Indian Ocean. The strategic waterway is used by container ships and exports of petroleum and natural gas from the Persian Gulf.

Approximately 12% of the world’s trade, which includes 30% of all global containers, move through the Suez Canal. That then feeds through the Red Sea and Bab el-Mandeb.

The Houthis recent attacks forced ships heading to Israel from Asia to take a route that circles Africa, making the journey three weeks longer and more expensive.In addition, the arrival of commercial ships to the port of Eilat has almost completely stopped.

The decision of Maersk, Hapag Lloyd, and MSC to halt shipping through the Bab el-Mandeb Strait will only magnify the impact of the blockade. The collective vessel market share of the three giant companies is approximately 40% of global trade.

Tensions in the strategic strait came after the Panama Canal drastically reduced its throughput capacity due to a severe drought this year.

Bulk grain shippers hauling crops from the United States Gulf Coast export hub to Asia are sailing longer routes and paying higher freight costs to avoid vessel congestion and record-high transit fees in the drought-hit canal, according to reports from last week

Prices for guiding ships through the Panama Canal are already rising, while the prices for shipping through Suez will officially rise with the beginning of next year.

If the Houthis keep their blockade on the Bab el-Mandeb for a long time; and if the drought affecting the Panama Canal is strong and remains in force until April or even June; then the global supply chain will face major problems which will reflect on the global economy.

The U.S. and European countries, not just Israel, will suffer from this shipping crisis. With the current spending on the war in Ukraine, large-scale sanctions and involvement in many other conflicts, the economy of the West may not survive.

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