Nestled between the colossal continents of Asia and Africa and connecting major waterways from the Indian Ocean to the Suez Canal to the Mediterranean Sea, the Red Sea has been a vital maritime route for international trade. The Red Sea hosts a diverse and expansive list of goods needed around the globe such as oil, containerized goods, agricultural and fishery products, textiles and clothing, automobile machinery, and raw materials, accounting for 10-15% of world trade, and 30% of global container shipping volumes (CNN). However, in recent months, attacks on shipping vessels located in the Red Sea have been wreaking havoc on global trade, causing weeks of delays and frustrating extra costs.

In response to the Israel-Hamas War, on October 19, 2023, the Iran-backed Houthi militant group in Yemen launched an airstrike consisting of a barrage of missiles and armed drones on Israel. Despite numerous US-UK strikes on Houthi military sites in Yemen, the Houthis have stated that they will not stop their attacks on Israeli ships until Israel ceases their war on Hamas. However, many of the vessels attacked by the Houthis have no connection to Israel, causing a widespread frenzy of international ships that have substantial commercial ties to the US and UK (BBC). “What the world is impatiently waiting for is not the militarisation of the Red Sea, but rather an urgent and comprehensive declaration of a ceasefire in Gaza, for humanitarian reasons that are clear to anyone,” Houthi spokesperson, Mohammed Abdul Salam, stated on X (Aljazeera).

Although much less detrimental than the shipping impacts of the pandemic, the current wholesale exodus of crucial shipping vessels in the Red Sea has created an unfavorable mark on world trade. About 90% of ships are forced to take a longer route around the southern tip of Africa to avoid the dangerous occupied area. According to CNN, this re-route has added as much as two weeks to the typical journey for container ships and about eighteen days for slower bulk carriers and tankers. The added miles of the new trip have increased fuel, insurance, charter, and wage costs for ships, accounting for an extra $1 million per vessel. A report by Drewry World Container Index showed that global shipping costs per forty-foot container has hiked up 90% from the same time last year. However, these costs are still below the pandemic peak the world experienced.  

Globally, worries among producers and consumers have sparked, as high costs threaten to cause an inflation spike. However, as of now, due to the cost-effectiveness of container shipping, the retail price per product should only rise by a fraction. The Organisation for Economic Co-operation and Development has stated that consumer price inflation could rise by 0.4 points after about a year, an optimistic outlook despite the current crisis. At the same time, this prediction can quickly change if the Israel-Hamas War threatens to persist longer, causing inimical impacts on global energy supply, textiles and machinery parts, and common goods.

The ongoing crisis occurring in the Middle East underscores how tight geopolitics and global trade have become in the modern decades, fostering greater interconnectedness between countries around the world. Without diplomatic and collaborative efforts between nations, maritime security, regional stability, and a commitment to open and secure sea routes will be in jeopardy. 

Sources retrieved from CNN, World Economic Forum, BBC, and Aljazeera.