The global economy is poised for an inflation shock and delayed supplies amid persistent attacks by Iran-backed Houthi rebels on merchant vessels in the Red Sea, as the fallout of the Israel-Hamas war in Gaza continues to roil the busy waterway.
Shipping costs and oil prices have already started seeing a rise, with the Houthis, who control much of Yemen, promising to inflict more damage until more aid enters the Gaza Strip, where Israeli bombardment has killed over 20,000 people.
The Red Sea, which is the main gateway for around 12 per cent of global trade, has seen the Iran-backed rebels launching more than 20 attacks on merchant ships in recent weeks, prompting several shipping companies to suspend trade or take a longer route between Asia and Europe.
Red Sea Crisis: Top Developments
- Most vessels are now being diverted around the Cape of Good Hope on the southern tip of Africa, which has resulted in an addition of thousands of miles (around 6,000 km) to the journey, increasing the voyage by 12–15 days. As per a CNBC report, more than $200 billion in trade over the past several weeks has already been diverted in the past several weeks.
- A Malta-flagged ship, believed to be headed to Israel, was the latest vessel to be attacked by the Houthis even though it was not hit. Earlier this week, two anti-ship ballistic missiles were fired toward merchant ships near the Bab al-Mandeb Strait, the US has claimed. The UK maritime trade operations department has also reported blasts near a cargo ship between the coasts of Eritrea and Yemen.
- In response, the US has set up an international naval task force to protect shipping in the Red Sea region. Over the past two weeks, several of the missiles and drones deployed by the Houthi rebels, who have warned of targeting ships with links to Israel, have been shot down by US, French and British warships. Stepping up its offensive, the US military also claimed to have sunk Houthi boats during the weekend after the rebels attacked a Maersk ship, AFP reported. Ten Houthi rebels are believed to have been killed.
- The Red Sea is an important route for oil transportation and around 10 per cent of the world’s oil passes through its waters. The crisis has fuelled a rise in oil prices in the first session of the new year, with Brent Crude up by 0.6 per cent to $77.53 a barrel, Reuters reported. British Petroleum (BP), one of the top oil firms, has rerouted its vessels, which will result in delayed arrivals and pinch the pockets of consumers.
- So, what does the crisis mean for India?
So far, India-flagged merchant vessels have not been targeted in the region. India, which imports much of its oil from Russia, has so far remained unscathed as Russian tankers are not being attacked by the Houthi rebels. This is so because Russia is perceived as Iran’s ally and has on several occasions flagged “the catastrophic humanitarian situation in Gaza” much to the chagrin of Israel.
However, it is the exports that will hurt India the most, with Union Minister Piyush Goyal flagging a possible hit to rice trade. A leading exporter of basmati rice, India exports around 4 million tonnes annually.
Iran Rocked By Twin Blasts Amid Crisis
Amid the crisis, Iran was rocked by twin blasts on Wednesday near the burial site of slain military commander Qasem Soleimani, killing over 100 people. While no outfit has claimed responsibility for the explosions, Iran has called it a “terror attack” that is likely to fuel tensions in the Middle East amid the Israel-Hamas War.
The United States said the explosion, which took place on the fourth anniversary of Soleimani’s death in a US air strike, bore resemblance to an Islamic State-style attack, with the State Department saying it had no reason to believe that Israel was involved, CNN reported.
