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Red Sea Crisis

Is escalation of conflict a threat to key shipping lanes?

Photo: US NAVCENT Public Affairs US Navy Helicopter in the Arabian Gulf
After coalition forces pounded Houthi targets questions are being asked as to whether this action itself constitutes an escalation of what started as a localised conflict in Gaza and Israel, into one with far wider implications for international shipping and trade.

With something in the region of 12% of global trade, more than $1 trillion worth a year, transiting Suez, and therefore the Red Sea and Bab al-Mandeb and some 20% of crude oil and gas supplies are exported through the Straits of Hormuz security tensions in the region are of grave concern to the industry.

Containing the conflict must surely be the aim, but with Houthi missiles having now attacked 27 ships in the Bab al-Mandeb and the Iranian capture of the St Nikolas in the Gulf of Oman, while opportunistic Somali pirates have restarted their own activities making the Gulf of Aden and the critical pathway to the Suez Canal a more dangerous place.

Missile bombardment by US and UK forces, supported by Australia, Bahrain, Canada and the Netherlands are aimed at protecting trade, according to the US and UK governments.

General Michael Erik Kurilla, USCentcom commander, declared: “We hold the Houthi militants and their destabilising Iranian sponsors responsible for the illegal, indiscriminate, and reckless attacks on international shipping that have impacted 55 nations so far, including endangering the lives of hundreds of mariners.”

Unsurprisingly the Houthi movement has condemned the attacks as “barbaric”, but it remains unclear what the wider effect will be on trade, even as the UK Prime Minister Rishi Sunak claimed that, “the early indications are that the Houthis’ ability to threaten merchant shipping has taken a blow”.

Speaking to Seatrade Maritime News Dryad Global CEO Corey Ranslem said: Right now, with the events from last night we expect an escalation within the Red Sea. Most shipping organisations are recommending that all vessels pause their operations within this region for the next 72 hours.”

Dryad Global is expecting a Houthi response to this action by the US and UK.

However, Ranslem points out: “The Houthi’s are very unpredictable so we could see this spread further South into the Gulf of Aden as well.”

Since the attacks by coalition forces on Yemen things have changed, according to Xeneta Chief Analyst Peter Sand.

“Tensions were already high in the region, now they are a bit higher,” said Sand, but he added there is some certainty, it will mean that ships will no longer wait to see if the Red Sea route is safe, but will head directly for the African Cape until there is certainty in the region.

“For container carriers if the disruption is one to three months then the carriers will cut strings short at either end, but if there is an expectation that it lasts three to six months then the carriers will be expected to add vessels to strings,” explained Sand.

Shippers, meanwhile, expect the disruption to shipping to last for some months, according to Global Shippers Forum Director James Hookham.

“Chinese New Year marks the start of the contract renewal season for many shippers, so my advice to shippers is to cut through the noise, cut through the fog of war, even though the military situation is getting worse, ships going around the Cape are safe,” he pointed out, adding that the cost of transiting Suez and the higher insurance premiums should be deducted from any extra costs incurred from the longer Cape journey.