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Global trade on edge as tension boils in the Red Sea

Attacks by Houthi rebels continue to disrupt trade in the Red Sea. Situated south of the Suez Canal, the Red Sea is the primary maritime route connecting Europe to Asia and East Africa, facilitating approximately 12% of global trade.


The Houthis, the Iran-backed militia group in Yemen, are behind the attacks. The attacks commenced following the onset of the Israel-Hamas conflict on October 7th.


The Houthis support Hamas and have stated their intent to target any ship heading towards Israel. While several Muslim countries have abstained from aiding Hamas in Gaza, the Houthis declared war against Israel at the end of October. 


Hailing from the Zaidi branch of Yemen's Shia Muslim minority, the Houthis are an armed group named after their founder, Hussein al Houthi. Since the civil war began in 2014, the Houthis have gained control of large swathes of western Yemen, including the capital Sana’a.


The Houthis have been launching missiles and naval drones aimed at Israeli cargo in the Red Sea from the controlled territories, including from the port of Hudaydah.


Over the past week, major shipping companies such as Maersk, Hapag-Lloyd, and MSC have decided to avoid using the Red Sea due to the high risks. Insurance risk premiums for sailing through these areas have sky-rocketed. At the start of December, the risk premium paid by shipping companies was only 0.07% of the value of a ship; it has now risen to 0.5- 0.7%.


On Monday 18th December, BP, a large oil company in the UK, announced that it would steer clear of the waters. “In light of the deteriorating security situation for shipping in the Red Sea, BP has decided to temporarily pause all transits through the Red Sea,” said the company.   


The United States has introduced Operation Prosperity Guardian (OPG)—a multinational initiative to safeguard trade. Participants include the UK, Bahrain, Canada, France, Italy, the Netherlands, Norway, Seychelles, and Spain. 


“This is an international challenge that demands collective action," commented US Defense Secretary Lloyd Austin.


He added, “Countries that seek to uphold the foundational principle of freedom of navigation must come together to tackle the challenge posed by this non-state actor”.


 


 


Edited by Tatyana Kekic 


 


 


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Tags: #globaltrade #redsea #Israel-Hamasconflict



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