Middle East conflict: Why the Houthi attacks in the Red Sea threaten global trade

Shipowners are calling for greater military protection of Middle East sea lanes after attacks by Iran-backed rebels in the Red Sea sparked fears of new disruptions to global trade, including energy supplies.

Middle East conflict: Why the Houthi attacks in the Red Sea threaten global trade

Shipowners are calling for greater military protection of Middle East sea lanes after attacks by Iran-backed rebels in the Red Sea sparked fears of new disruptions to global trade, including energy supplies. Just over a week ago, the Pentagon announced that a US warship and three merchant ships had been attacked off the Yemeni coast. Houthi rebels had already targeted Israeli ships last month. As a result, the early December attacks raised concerns that Houthi rebels and their supporters in Iran were expanding their campaign  – in response to the war in Gaza.

The attacks show that "greater military resources" need to be deployed, says Jakob Larsen, head of security at Bimco, which represents global shipping companies. "If three ships are attacked [on the same day] in the same geographical area, that means we don't have enough resources," he says.

U.S. national security adviser Jake Sullivan called the attacks “completely unacceptable.” The US is in talks with other countries about setting up a maritime task force to ensure the “safe passage of ships in the Red Sea”.

It's a new threat to shipping - although not long ago the coronavirus pandemic and the Russian invasion of Ukraine disrupted supply chains, fueling inflation and cooling the global economy. The new threat could now impact trade in everything from crude oil to motor vehicles.

Analysts say traders are now underestimating the risk of further disruption. “The oil market has become too complacent about the risk that the Gaza conflict will spread regionally and threaten oil and gas infrastructure and shipping in the Red Sea and Gulf,” said Bob McNally, founder of Rapidan Energy and a former consultant of the White House during the presidency of George W. Bush.

Since 2019, the Houthis and other Iranian allies have attacked several ships in the Middle East, hijacked oil tankers and carried out attacks with limpet mines on the hulls of ships. The recent attacks also heighten concerns about Iran's threat to the Strait of Hormuz.

The latest attacks also heighten concerns about Tehran's threat to the Strait of Hormuz - the strait that separates Iran from Gulf states and represents a bottleneck for oil and gas exports. McNally puts the likelihood of a “significant disruption to regional energy flows” at 30 percent. "Even if neither Tehran nor Washington seek direct conflict, they may not be able to avoid accidental clashes or halt the rising spiral of mutual attacks."

About 40 percent of oil traded by sea passes through the Strait of Hormuz daily, as do liquefied natural gas shipments from Qatar, which play an important role in replacing Russian gas. According to the US Energy Information Administration (EIA), almost a tenth of the oil traded by sea is transported via the Red Sea route alone. Goods from Asia are also transported via this route.

Even narrower and more vulnerable to attack is the Strait of Bab el-Mandeb, which separates the Gulf of Aden from the Red Sea. “The route across the Red Sea is important,” says Henning Gloystein from the consultancy Eurasia Group. "It's even more important for the Europeans because they get all their oil and liquefied natural gas from the Middle East via the Red Sea."

In an attack on an Israeli car carrier in November, Houthi rebels boarded the ship by helicopter - a tactic that, according to Gabrielle Reid of security consulting firm S-RM, "is used much more frequently by Iran." "This suggests that there may be greater disruption to commercial shipping in the region," she added.

Shipowners are now looking for safer but more expensive alternative routes and demanding more protection in Middle Eastern waters. New York Stock Exchange-listed Israeli cargo shipping company Zim said it was rerouting some of its ships and warned customers of longer transit times. The alternative route involves going around the Cape of Good Hope near Cape Town and then past West Africa - a much longer and more expensive route.

And ship owners are already having to pay more for insurance, reroute ships and invest in additional safety measures. In the week before the attacks in the Red Sea at the beginning of December, some insurers had already increased their rates, says Marcus Baker, head of shipping at the insurance broker Marsh - in one case even by 300 percent. The market must “react” to the recent incidents. But he also said that the shipping companies had little choice but to stick to the existing route. "If you're trying to transport [certain] goods around the world, you almost inevitably have to go through the Red Sea region."

Seagull Maritime's chief operating officer, Dimitris Maniatis, reports that his company is receiving "more and more" requests for armed guards from shipowners around the world. To counter the threat of Somali pirates, many private security groups have been formed. However, these could do “very little” against state-sponsored drone and missile attacks, said Maniatis.

“The risk of collateral damage has increased,” said the security chief of a Singapore-based tanker owner. At least one of the merchant ships attacked on the first Sunday of December is said to have had no clear ties to Israel. "We are easy prey when attacked from outside. Nobody is in a position to counter such a threat - unless it is a military intervention."

This article, translated from the "Financial Times", first appeared here in the business magazine "Capital", which, like stern, is part of RTL Deutschland.

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