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Red Sea: Business leaders fear prolonged disruptions

Attacks on commercial ships are increasing in the Red Sea, through which almost 20% of world trade passes.

The Red Sea transportation disruption caused by Houthi attacks in Yemen could disrupt supply chains for months and lead to a shortage of tankers, business leaders said at the World Economic Forum in Davos, Switzerland.

The Iran-aligned Yemeni Shiite movement is increasing attacks on commercial ships in the Red Sea in support of the Palestinians, saying they particularly target Israeli ships or ships heading to Israeli ports.

These attacks have slowed trade between Asia and Europe and put several major powers on alert. Maersk and other shipping companies have diverted some of their ships to southern Africa or suspended deliveries to avoid the Red Sea. “It’s really disturbing because almost 20% of world trade goes through the Bab el Mandab Strait (in the Red Sea),” said Maersk CEO Vincent Clerc.

Delivery times extended by about ten days

Transportation costs have more than doubled since the beginning of December, according to the Drewry Index, while insurance costs for deliveries across the Red Sea have also increased. Banking industry executives are concerned that this crisis could generate new inflationary pressures that could push back the expected interest rate cut. Alternative routes via the Cape of Good Hope in South Africa extend delivery times by 10 to 14 days compared to a passage through the Suez Canal and the Red Sea. Houthi attacks could lead to a shortage of oil tankers, the CEO of Saudi oil giant Aramco has warned.

The United States formed an international operation in December to secure shipping in the region and carried out strikes against targets linked to the Houthis. Two US officials said on Tuesday that the strikes had targeted the Yemeni movement’s anti-ship missile launch sites. US President Joe Biden is considering putting the Houthis back on the list of terrorist organizations, two US leaders told Reuters.

Author: TT with Reuters
Source: BFM TV

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