Houthi threats to shipping have led to rising oil prices: a global crisis threatens

More than 100 container ships have been diverted from the Suez Canal to avoid Houthi attacks. The diversion of merchant ships to the Cape of Good Hope adds 6,000 nautical miles and three to four weeks to shipping times and has driven up oil prices.

More than 100 container ships have been diverted around South Africa to avoid the Suez Canal, in a sign of disruption to global trade caused by Houthi rebel attacks on shipping off Yemen’s west coast, The Guardian reports.

Shipping company Kuehne and Nagel said it had identified 103 vessels that had already changed course and more were expected to round South Africa’s Cape of Good Hope.

The diversion adds about 6,000 nautical miles to a typical journey from Asia to Europe, potentially adding three to four weeks to delivery times for goods.

The Houthi rebels, who The Guardian says are linked to Iran, said they attacked the ships in retaliation for Israel’s bombing of the Gaza Strip. Israel retaliates against attack by Hamas, which controls Gaza. The United States said Tuesday it would try to lead a naval coalition to protect shipping in the Suez Canal.

About 19,000 ships pass through the Suez Canal every year, making it one of the world’s key routes, especially for transporting fossil fuels and goods between Asia and Europe.

According to Kuehne and Nagel, the vessels that have so far deviated from the route could have been carrying containers 1.3 m 20 ft (6 meters) long. Oil and gas carriers were also diverting from the shorter route, with BP becoming the largest company to publicly say so. Its rival Shell declined to comment.

The failure contributed to rising oil prices, the Guardian notes. The price of Brent crude futures, the global benchmark, rose 1.2% on Wednesday to above $80, after falling below $74 a week earlier. Further price increases could ultimately impact energy prices for consumers, increasing inflation.

Michael Oldwell, Kuehne and Nagel board member for maritime logistics, emphasizes: “Long time spent on the water is expected to absorb 20% of the world’s fleet capacity, leading to potential delays in the availability of transport resources. Moreover, delays in returning empty equipment to Asia are likely to create problems, further impacting the overall reliability of supply chains.”

Companies around the world, including several major automakers, are monitoring the situation to see if their supply chains could be affected. The last major unexpected closure of the Suez Canal occurred in March 2021, when a container ship was blocked from passing through for six days.

The latest disruptions will not impact retail this Christmas as stock builds up weeks or even months in advance, meaning items are already in UK stores or warehouses, The Guardian writes.

But a prolonged disruption to normal supply patterns could eventually lead to shortages of products for consumers or parts for manufacturers, although few have reported any impact so far.

The outage coincided with a period when many factories were temporarily closed for Christmas, giving companies extra time to secure critical supplies, Kuehne and Nagel said.

Some manufacturers have already moved from just-in-time supply chains that relied on prompt delivery of goods to a less efficient but more resilient “just in case” model with a large inventory of spare parts for emergencies.