Suez Canal Closed: Asia to Europe

Shipping companies are facing uncertainty surrounding a newly announced international navy coalition by the United States to combat attacks in the Red Sea. This has led to many vessels avoiding the area and cancelling contracts. The initiative, launched on Tuesday, has not provided many practical details or a clear plan of action in the event of future attacks.

The attacks, carried out by Iran-backed Houthi militants in Yemen, have intensified since November 19 and have disrupted a major trade route. The group has also threatened to strike US warships if targeted. However, previous attacks have been successfully repelled by US warships.

?There are still many unknown factors regarding the coalition, such as the number of warships involved, their arrival time, rules of engagement, and protection scheme. This could potentially be a major undertaking for protecting commercial vessels in the region.

?The threat to commercial shipping is expected to continue as the conflict in the area persists. Many shipping companies have already diverted their routes around Africa or paused operations in the region. The success of the coalition's efforts will determine whether more companies will take similar measures.

?On a visit to Bahrain, US Secretary of Defense Lloyd Austin announced the involvement of several nations, including Bahrain, Britain, Canada, France, Italy, the Netherlands, Norway, Seychelles, and Spain in the Red Sea security operation. The group will conduct joint patrols in the southern Red Sea and the adjacent Gulf of Aden.

?However, the effectiveness of the coalition's actions remains to be seen, as it is unclear if they will do more than swat down missiles. The market needs to see concrete results in order to have confidence in the coalition's abilities.

?The International Chamber of Shipping expects the coalition to coordinate a significant response with a large number of military warships. However, many container shipping companies are still choosing to reroute their voyages through Africa, which adds time and cost to their journeys.

?As a result of these disruptions, there are concerns about potential delays in deliveries and price increases that could contribute to global inflation. Some shipping companies have already cancelled charter contracts or are requiring additional risk premiums due to the rising costs of war risk insurance cover.

?It is important to note that a US-led Combined Maritime Force already exists in the region, focused on counter-narcotics, counter-smuggling, piracy suppression, and regional cooperation. The new coalition, initially led by the US and UK, will likely see more members joining over time.

?Overall, it is expected that this new coalition will have a significant impact on suppressing attacks in the Red Sea. However, its effectiveness and success will depend on its rules of engagement and willingness of member countries to contribute.