The Effect Of Israel–Hamas War on the Supply Chain
Understanding the Rising Tensions and Their Impact on Shipping
The southern Red Sea, a crucial segment of one of the world's busiest shipping channels, is gaining attention due to increasing maritime risks. This area, south of the Suez Canal, is a vital link between Europe, Asia, and East Africa. The Bab el-Mandeb Strait, a narrow passage between Djibouti and Yemen, is particularly significant. Approximately 12% of global trade, including 30% of container traffic, passes through here. Any disruption in this region can have far-reaching effects on global trade, influencing petrol prices, electronics availability, and more.
The Houthis, a Yemeni rebel group controlling parts of Yemen including the Red Sea coast, have recently escalated attacks on commercial shipping. Initially targeting vessels linked to Israel, their attacks have broadened, creating uncertainty for all maritime traffic in the region. The US and other Western nations have responded by intercepting Houthi attacks and forming Operation Prosperity Guardian (OPG), a coalition to protect vessels in the area. However, the situation remains tense, with the potential for further escalation.
Shipping companies are increasingly avoiding the Red Sea, with major players like Maersk and Hapag-Lloyd suspending operations. Alternative routes, such as around the Cape of Good Hope, add significant time to voyages. The disruption has led to a spike in insurance premiums for ships passing through high-risk areas.
The impact on consumers is already being felt, with rising oil and gas prices as companies like BP halt shipments through the Red Sea. The dilemma for shipping companies is stark: face the heightened risks and costs of Red Sea transit or opt for longer, alternative routes. Both choices come with the potential for increased costs and delays, affecting global supply chains.
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End to end supply chain solutions to reduce cost, optimise inventory, improve customer satisfaction, smarter processes and capability building | Founder & CEO - 7th Mile Shift | Ex-TVS Motor Company - AVP Logistics.
10 个月In light of the escalating tensions in the southern Red Sea, it's evident that the implications extend far beyond the immediate region. As you've pointed out, this crucial maritime passage serves as a linchpin for global trade, making it imperative for stakeholders to navigate the associated challenges wisely. The question that arises is: How can the international community collectively address these rising tensions to ensure the stability of this vital shipping route and mitigate the impacts on global supply chains?