Business Leaders Worried About Red Sea Crisis And Supply Chain Disruption


  • The attacks represent an escalation in Israel’s over three-month-old war with Palestinian Hamas militants in Gaza.
  • Disruptions to shipping in the Red Sea may impact supply chains for months, potentially leading to a shortage of tankers for fuel transportation, warned business leaders.
  • Attacks by the Iran-allied Houthi militia on ships in the Red Sea since November have slowed trade between Asia and Europe, causing concerns among major powers.
  • Iranian Foreign Minister Hossein Amirabdollahian stated that ending the Gaza war is necessary to remove the threat to shipping in the Red Sea.
  • The alternative route around South Africa’s Cape of Good Hope could add 10-14 days to journeys compared to the Red Sea route through the Suez Canal.

Escalation Of Conflict And Supply Chain Warnings

Attacks by the Iran-allied Houthi militia on ships in the region since November have slowed trade between Asia and Europe and alarmed major powers — an escalation of Israel’s more than three-month-old war with Palestinian Hamas militants in Gaza.

Business leaders issued a warning on Wednesday, saying that the disruptions to shipping in the Red Sea, resulting from attacks by Yemen’s Houthi militants, might impact supply chains for months and potentially cause a shortage of tankers required for fuel transportation.

Since November, attacks by the Iran-allied Houthi militia on ships in the region have hampered trade between Asia and Europe, causing concern among major powers. This situation marks an escalation in Israel’s ongoing war with Palestinian Hamas militants in Gaza, which has been ongoing for more than three months.

Gaza War Link And Houthi Solidarity

Iranian Foreign Minister Hossein Amirabdollahian, whose country backs Hamas in its war with Israel, said an end to the war in Gaza was needed to remove the threat to shipping.

“The security of the Red Sea is tied to the developments in Gaza, and everyone will suffer if Israel’s crimes in Gaza do not stop … All the (resistance) fronts will remain active,” Amirabdollahian said at the World Economic Forum in Davos.

The Houthis say they are acting in solidarity with Palestinians and have threatened to expand attacks to include U.S. ships in response to American and British strikes on their sites in Yemen.

Diplomatic Efforts And Shipping Disruptions

India has held diplomatic talks with Iran and is taking other measures to help shield its exporters from the impact of the attacks, a government source said on Wednesday.

Maersk and other large shipping lines have instructed hundreds of commercial vessels to stay clear of the Red Sea, sending them on a longer route around Africa or pausing until the safety of vessels can be assured.

“It’s one of the most important arteries of global trade and global supply chains and it’s clogged up right now,” Maersk CEO Vincent Clerc told Reuters Global Markets Forum in Davos, adding that disruption would probably last at least a few months.

Economic Concerns And Industry Impact

Banking executives are worried the crisis might create inflationary pressures that could delay or reverse interest rate cuts. Freight rates have more than doubled since early December, according to maritime consultancy Drewry’s World Container Index, while insurance sources say war risk premiums for shipments through the Red Sea are also rising.

The attacks target a route that accounts for about 15% of the world’s shipping traffic and is a vital conduit between Europe and Asia. Japanese trading house Sumitomo Corp was the latest company caught up, saying it had some cargoes in the Red Sea that were affected by the situation.

The attacks are causing major disruption to Italian ports and fuelling fears that a prolonged crisis may force companies to move traffic away from the Mediterranean more permanently.

EU Maritime Security Initiative And Shipping Challenges

Italy wants fellow European Union members to agree next week to create an EU maritime security mission so that it can become operational as soon as possible, Italian Foreign Minister Antonio Tajani said on Wednesday.

The alternative shipping route around South Africa’s Cape of Good Hope can add 10-14 days to a journey when compared to a passage via the Red Sea to the Suez Canal.

Prolonged attacks by the Houthis on ships would lead to a shortage of tankers, the CEO of Saudi oil giant Aramco said.”If it’s in the short term, tankers might be available … But if it’s longer term, it might be a problem,” CEO Amin Nasser said in an interview in Davos.

U.S. Military Response And Counterterrorism Measures

The U.S. military carried out new strikes in Yemen on Tuesday against anti-ship ballistic missiles in a Houthi-controlled part of the country as a missile hit a Greek-owned vessel in the Red Sea.

In a bid to cut off their funding and supply of weapons, U.S. President Joe Biden’s administration plans to put Houthi rebels back on a U.S. list of terrorist organizations, two U.S. officials told Reuters.

In a sign of the tensions, a Malta-flagged container ship was approached on Wednesday by three skiffs and a drone 10 miles southwest of Yemen’s Dhubab. British maritime security firm Ambrey said no damage or casualties were reported in an advisory note.

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Source: Firstpost


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