Houthi Attacks on Shipping Escalate, Impact Global Trade

Summary

  • Since November, Iran-aligned Houthi militants have been attacking ships, impacting businesses and causing concerns among global powers due to the escalation of Israel’s conflict with Hamas militants in Gaza.
  • The latest Houthi attack targeted the dry bulk carrier Gibraltar Eagle off Yemen’s port of Aden with an anti-ship missile. Eagle Bulk Shipping, the operator, reported no injuries and a fire in a hold, but the ship, loaded with steel products, is continuing its journey.
  • Previously, the Houthis stated they would only target Israeli ships or ships headed towards Israel, prompting container vessels to reroute via the Cape of Good Hope or stop in response.
  • Commercial and geopolitical interests of China are at risk due to civilian vessel attacks in the Red Sea. China called for an end to these attacks.
  • Suzuki had to halt production at its Hungarian plant due to shipping disruptions in the Red Sea which delayed engine deliveries.

Houthis Target Shipping Routes

Noteworthy is the recent escalation of the more than three-month-long war between Israel and Hamas militants in Gaza due to attacks on ships by Iran-aligned Houthis. Notably, the recent Houthi attack targeted the Gibraltar Eagle, a dry bulk carrier off Yemen’s port of Aden, with an anti-ship missile. Fortunately, the ship’s operator, Eagle Bulk Shipping, confirmed there were no injuries, although there was a fire in a hold.

Repercussions on Global Trade

The Gibraltar Eagle, which is loaded with steel products, is currently continuing its journey. Previously, the Houthis announced their intention to only target Israeli ships or vessels en route to Israel. This announcement has prompted some container vessels to deviate from or hold their route through the Red Sea and instead navigate via the Cape of Good Hope.

LNG TANKERS

Particularly alarming is Monday’s ship-tracking data showing at least 15 tankers altering their course in response to the escalating conflict. This piece of information and the stoppage of Qatar’s Al Ghariya, Al Huwaila and Al Nuaman LNG tankers loaded at Ras Laffan on their way to Suez Canal in Oman on Jan. 14 is concerning.

Impact on World Shipping

It’s important to note that approximately 12% of global shipping traffic transits the Suez Canal via the Red Sea. Consequently, the longer route around Africa’s Cape of Good Hope chosen by different shipping companies may increase the travel time from Qatar to northwest Europe by about nine days.

International Response

Amidst all these developments, China has voiced concern over its commercial interests suffering due to civilian vessel attacks in the Red Sea, calling for a halt to these attacks. Similarly, Britain underscored its commitment to protecting free navigation while expressing disinterest in getting embroiled in the Red Sea conflict.

SUPPLIES AFFECTED

Shipping disruptions in the Red Sea have forced Suzuki to suspend production at its Esztergom plant in Hungary until Jan. 21 since Japanese-made engines were not delivered on time. Further, oil prices fell approximately 1% on Monday as the limited impact of Middle East conflict on crude output led to profit-taking after oil benchmarks gained 2% last week.

Market Implications

The escalation of the conflict and its impact on shipping routes can cause fluctuation in international market rates and affect trading, especially concerning assets like oil and natural gas, creating significant ripples in the global trading scenario.

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