Introduction:
Houthi attacks backed by Iran on ships in the Red Sea have increased by up to 500% following the war between Israel and Hamas in the Gaza Strip. Experts have warned that this will disrupt vital maritime trade routes and impact global supply chains. Experts expect a rise in global trade prices and goods, particularly jet fuel for Europe, which is the most immediate and significant increase.
The Impact on Fuel and Commodity Prices
Matt Stanley, a petroleum specialist and senior commodity broker at Starfuels in Dubai, told “Al-Arabiya English” that attacks on the vital shipping lane have global repercussions. He stated that his company has received “numerous inquiries” about how Houthi attacks in the Red Sea are impacting oil prices in the region and globally.
“Remember that about a trillion dollars of trade passes through the Suez Canal daily,” he said. “And about a third of the world’s oil production passes through the Suez Canal. It’s an extremely important shipping route, especially geographically if you’re in the Eastern Mediterranean – like Greece, Turkey, Italy … those places. Many of the raw materials that go to their refineries that produce the oil their countries consume now come from the Middle East due to a major shift in dynamics where they can no longer purchase it from Russia [due to the war in Ukraine].”
Stanley added, “So now, they have to get it from somewhere else, and the majority comes from the Middle East.”
Shipping Cargo Diversions
Since the escalation of Houthi attacks, over 300 cargo ships have been diverted, forcing them to travel thousands of extra nautical miles. This includes the German company Hapag-Lloyd, which announced this week that it will continue to divert its ships away from the Suez Canal around the Cape of Good Hope for security reasons, according to a company spokesperson on Tuesday.
He stated, “We are monitoring the situation closely on a daily basis, but we will continue to divert our ships until January 9,” said the spokesperson for the fifth-largest container shipping company in the world in response to an inquiry from Reuters.
Danish shipping company Maersk has also suspended plans to use some of its vessels on the Red Sea route due to the ongoing threat of attacks from Houthis in Yemen, stating it will announce the sailing schedule for each ship later.
Impact of Jet Fuel on Consumers
Stanley indicated that the most immediate impact of rising shipping costs due to the threat in the Red Sea will be on commercial jet fuel prices, especially in Europe.
“For petroleum products, we believe the fastest impact on end-user prices will be on jet fuel. Europe obtains about 40% of its jet fuel from the Middle East,” Stanley said, adding, “and jet fuel will be the most affected within Europe.”
He also remarked, “But when you break it down and distribute it, what it means for each barrel or liter isn’t a major amount. But it’s still an added cost, especially at this time of year after Christmas and with rising interest rates, where people are more sensitive to cash than ever before.”
What is the End Goal?
Faria Al-Maslamani, from the Middle East and North Africa Program at Chatham House, told “Al-Arabiya English” that the impacts on commodity prices and end-users are not yet clear.
He added, “So far, it hasn’t negatively impacted oil prices, but shipping costs — even from areas that are not only in the Red Sea — are gradually being affected, and, of course, the impact of insurance (prices) on longer alternative routes.”
Al-Maslamani also noted, “The worst impacts (of Houthi attacks) on commodity prices and goods — specifically in Yemen — will be severe. They were already bad due to the war (in Yemen), and because of COVID-19, and due to the Ukraine war. Now, it will definitely become worse. This is not something the Houthis calculate or care about. Hence, they will continue at any cost.”
The Threat
Escalation of Violence
Al-Muslimi stated that the increase in the number of attacks is expected to lead to an escalation of violence in Bab al-Mandab in Yemen and the Red Sea. This will also impede the United Nations peace process in Yemen, which was expected to resume in the new year.
He said: “The Red Sea is the new frontline for the Axis of Resistance and the second front for Gaza. Whether Iran asked the Houthis to carry out these attacks or not, it no longer really matters. The actions of the Houthis go beyond even what Iran dreams of or requests. At little cost, they can significantly disrupt the international system and disrupt trade.”
Iranian Threat
Rafael Cohen, a senior policy scholar at the RAND Corporation and director of the strategy and doctrine program at RAND’s Air Power Project, told “Al Arabiya English” that while the Houthis claim the Red Sea attacks are a direct reaction to Israel’s war on Gaza and that they are showing solidarity with the Palestinian people, “there may be other reasons at play as well.”
Cohen stated: “The Houthi attacks have elevated their status and moved them from being a regional threat to an international threat. The Houthis also rely on Iranian support. We have seen Iranian proxies in the region attacking both Israeli and American targets over the past several months (such as the attacks by Hezbollah brigades on U.S. bases in Iraq). So, there is an Iranian dimension here as well.”
This is the translated text of the article from its original source.
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