ALBAWABA – Several shipping companies have announced they will either be avoiding the Red Sea shipping route altogether or will not be stopping at any of the checkpoints off the coast of Yemen.
Meanwhile, the new coalition led by the United States (US) has announced plans to step up intervention in the Bab al-Mandeb straits and is mulling over strikes against the Houthi rebel group.
On Wednesday, Greece advised commercial vessels sailing in the Red Sea and the Gulf of Aden to avoid Yemeni waters, according to Reuters.
Greek shippers control about 20 percent of the world’s commercial vessels in terms of carrying capacity.
Elsewhere, British Petroleum (BP) announced Tuesday it will be suspending all Red Sea shipping operations, according to BBC. And other major shippers, including Maersk, have announced they will be taking the long way around.
According to Bloomberg, the long way around Africa adds $1 million in costs — and seven to 10 days — to each voyage, which is buoying oil prices.
Overall, the global shipping industry is reportedly bracing for the prospect of living without its most important trade route for weeks.
In the meantime, the announcement of the coalition – Agence France-Presse (AFP) highlighted – comes as a recognition that the task force announced earlier to combat Houthi attacks is not enough.
Markets brace for weeks of Red Sea shipping disruption – Shutterstock
Yet, Bloomberg reported shippers are concerned that too forceful a response will only escalate the violence, and may render the vital waterway unusable for the foreseeable future.
Notably, around 12 percent of global trade goes through the Red Sea shipping route, Reuters reported, and nearly 8 percent of all crude shipments, according to Bloomberg.
So far, the disruption of Red Sea shipping has driven a rally in oil prices, but only marginally, the New York-based news agency reaffirmed.
Brent crude futures rose $0.89, or 1.1 percent, at $80.12 a barrel by 1101 GMT, according to Reuters, and West Texas Intermediate crude climbed $0.93, or 1.3 percent, to $74.87 a barrel.
Oil prices have been rising for the last few sessions, but it is unlikely to be a major driver of fossil fuel inflation. The bulk of crude exported from the Middle East is shipped through the Hormuz Straits, news agencies have reported.
Bloomberg’s analysts expect loose convoys, or group transits, to protect Red Sea shipping, as a strict convoy — where military ships escort vessels — is less likely. It is resource-intensive and there may not be enough warships.
The US-led coalition that is participating in Operation Prosperity Guardian includes only a handful of European Union countries.
