How wars, geopolitical tensions have impacted shipping industry

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In recent months, the Red Sea, one of the world’s vital shipping routes, has transformed into a no-go zone as Yemen’s Houthi rebels intensify their attacks on vessels with connections to Israel, the United States, or the United Kingdom. The Houthi rebels, aligned with Iran and considering Israel an enemy, have targeted dozens of cargo ships in the Red Sea since November, raising significant concerns in the maritime and geopolitical arenas. The Red Sea has become a focal point of concern as Yemen’s Houthi rebels target commercial vessels, prompting major shipping companies and oil giants to reroute trade, causing potential delays and rising prices worldwide. BP announced a temporary pause in transits through the Red Sea, citing crew safety as the priority. The attacks have led to increased market nervousness, reflected in rising oil and European natural gas prices. The Houthi attacks pose a threat to critical energy supplies, including oil and liquid natural gas shipments, reaching Europe and other destinations through the Red Sea and the Suez Canal. Approximately 10% of the world’s trade passes through this vital waterway. In addition to energy supplies, essential goods like palm oil, grain, and most manufactured products are transported by container ships, with many passing through the Suez Canal.

Image credit: foreignpolicy.com

The Houthi attacks have escalated tensions along this crucial waterway, disrupting global trade and forcing major shipping companies to reassess their routes. The Red Sea is a strategic passage for international commerce, facilitating the transportation of goods
between Asia, Europe, and other key regions. The attacks by the Houthis have created a challenging environment for shipping companies and have broader implications for the global supply chain. The militant Islamist group has explicitly targeted vessels bound for Israel or those with affiliations to the US and the UK. This targeting strategy underscores the geopolitical nature of the conflict, with the Houthis aligning themselves with Iran and perceiving nations such as Israel as adversaries. The attacks have not only resulted in direct damage to the targeted vessels but have also raised concerns about the safety and security of maritime trade routes in the region.

Credit: Media hand out via Reuters

The Houthi rebels, known for their asymmetric warfare tactics, have reportedly used naval aircraft in their attacks, complicating efforts to defend against these assaults. The international community, including the US and UK, has condemned these actions, emphasizing the need to ensure the freedom of navigation in this critical waterway. Shipping companies, in response to the escalating threat, have been compelled to reroute their vessels away from the Red Sea, choosing alternative paths that avoid the Houthi-controlled areas. This shift in routes has implications for global trade, leading to delays, increased transit times, and higher operational costs. The attacks also have broader implications for geopolitical dynamics in the Middle East, as they coincide with Iran’s regional influence and
the ongoing conflicts in the region. The Houthi rebels’ alignment with Iran raises concerns about the potential for further escalation and the impact on regional stability. As the situation unfolds, the international community, particularly nations directly affected by
these attacks, is closely monitoring and responding to safeguard maritime security. The Red Sea’s transformation into a no-go zone for certain vessels highlights the complex challenges faced by the shipping industry and underscores the interconnectedness of global trade with geopolitical events in the Middle East.

Author: Memon Faizal
Junior Engineer