- Red Sea closures jeopardize global trade, affecting oil prices and disrupting vital food and fertilizer shipments.
- The crisis unfolds, posing a significant threat to the world’s economic stability.”
As shipping companies face closures in the Red Sea due to Yemeni rebel attacks, it could significantly impact global trade. About 22-23% of goods traded between distant countries pass through the Red Sea, especially its critical points, Bab-el-Mandeb and the Suez Canal.
Impact on Oil Shipments and Prices
While not as crucial as other routes, the Red Sea plays a significant role in oil shipments. The ongoing situation has led to oil price fluctuations globally. Although it’s not as vital as the Strait of Hormuz or the Strait of Malacca, disruptions in the Red Sea can still influence the global oil market.
Key Transit for Food and Fertilizer
The Red Sea serves as a crucial transit point for global food and fertilizer shipments. Prior to the pandemic and the Ukraine crisis, Bab-el-Mandeb facilitated almost 20% of global rice and nearly 15% of global wheat exports. The ongoing disruptions in the region add to the challenges faced by the global food and fertilizer trade.
Importance of Global Shipping
China, with its strong export capabilities, remains central to global trade chokepoints. Approximately 80% of globally traded goods are transported by sea, emphasizing the critical role of maritime routes. Even when considering the value of goods instead of weight, sea routes still handle about 70% of global trade.
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Source: Statista
