Suez Canal Traffic Plunge Raises Inflation Fears: ONS Report

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  • A dramatic 66% decline in shipping traffic through the Suez Canal due to vessel attacks has sparked concerns over inflation.
  • The diversion of cargo around Africa has led to significant disruptions in global supply chains, impacting transit times and driving up costs for insurance, fuel, and wages.

The Office for National Statistics (ONS) reveals a staggering 66% drop in shipping traffic through the Suez Canal from mid-December to early April, following attacks on vessels. The diversion of cargo around Africa, amid attacks by Iran-backed Houthi fighters targeting ships, has disrupted global supply chains and raised fears of inflation due to increased costs.

Impact on Transit Times and Costs

The diversion of cargo from destinations like China to Europe around the southern tip of Africa has added up to 14 days to transit times. This has led to soaring costs for insurance, fuel, and wages, posing a significant risk of fueling inflation. Container prices have surged by over 300% as disruptions intensified earlier this year.

Economic Monitoring and Consequences

While separate ONS data on inflation rates is yet to reflect the full impact, institutions like the Bank of England are closely monitoring the situation. Rising costs have already affected numerous companies, with container prices skyrocketing and transit volumes through key maritime routes plummeting, especially in the Red Sea and the Strait of Hormuz.

Oil Prices and Market Repercussions

The prospect of more perilous tanker journeys amid heightened tensions in the Middle East has driven up oil prices. Brent crude, trading around $80 a barrel earlier this year, surged to $91 amid escalating conflict between Israel and Iran. The fluctuating oil market, coupled with supply disruptions, has significant implications for global energy prices and inflation.

Continued Concerns and Market Dynamics

With the ongoing conflict and uncertainty in key maritime regions, concerns over inflation persist. The impact on oil prices and shipping routes underscores the interconnectedness of global trade dynamics and geopolitical tensions. As the situation unfolds, experts warn of further economic repercussions and the need for continued monitoring and intervention to mitigate inflationary pressures.

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Source: News sky