The Houthi Rebels continue to disrupt Red Sea shipping, causing ripple effects all across the global economy.
The Houthi Rebels in Yemen have attacked oil tankers and other shipping vessels in the Red Sea for over three months. By now, they have become a serious threat to global trade, with ripple effects all across the Western world.
Most of the world’s trade passes through the Bab El-Mandeb Strait, the Red Sea, and subsequently the Suez Canal. All of them are easily within the range of Houthi missiles. The Yemenite rebel group started these attacks in retaliation to Israel’s invasion of Gaza.
The United States and the United Kingdom sent different naval task forces to protect Red Sea shipping. They fired on Houthi military targets and intercepted several missiles. The European Union also sent a separate mission to the Red Sea.
Nevertheless, Houthi rebels continue firing and hitting vessels, so much so that most companies are re-routing their ships around Africa.
In addition, fewer new oil tankers will be built this year than in the last decade. “The situation is tight in the tanker market, in particular for crude oil tankers,” said Banchero Costa’s research manager Enrico Paglia. While new orders have been ticking up in recent months, it takes years for such vessels to be made. This year, Banchero Costa will sail barely 2 new vessels, compared with 42 in 2022.
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The ripple effects
The disruption of Red Sea trade is causing several downfall effects on Western economies. The British Chamber of Commerce said 55% of the UK’s exporters are feeling the effects of shipment delays. Added to that are 53% of British B2C businesses.
According to BCC officials, the spare capacity of the freight industry has so far mitigated the effects of the delays. The longer the situation persists, however, the more negative effects will pile up.
“The problem is that the Houthis are continuing to escalate,” said I.R. Consilium CEO Ian Ralby, “and so the full economic impact and overall impact of this situation may yet be felt.”
Ralby also noted these attacks present significant humanitarian and environmental risks. “The Red Sea is different than most other bodies of water,” he said, “because along the coast are desalination plants that provide the drinking water for tens of millions of people along the Arabian Peninsula coast and the African Red Sea coast.”
But while the Western missions are helping, they are not helping as much as hoped. A harsher response, however, could escalate an already dangerous regional conflict.
