[Otto Harkaman]

How has the Red Sea conflict affected regional trade and shipping routes?

The Red Sea conflict has significantly impacted regional trade and shipping routes. Let’s explore the consequences:

1. Disruptions to Global Commerce:
   • The Red Sea is a vital waterway for international trade, connecting the Indian Ocean to the Suez Canal and the Mediterranean Sea.
   • Houthi attacks on ships in the Red Sea have caused major disruptions to commercial shipping.
   • These disruptions threaten a key maritime route essential for a significant share of global container traffic and over $1 trillion in annual merchandise1.
2. Immediate Contraction in Market Capacity:
   • Since November 2023, the Houthi group has targeted commercial vessels in the Red Sea, leading to over 33 attacks.
   • In response, the US and EU have spearheaded Operations Prosperity Guardian and Aspis to safeguard navigation and trade flows.
   • However, challenges persist due to the Houthis’ deployment of drones, missiles, and vessel tracking capabilities.
   • As a result, there has been an immediate contraction in market capacity and a surge in shipping rates1.
3. Rerouting and Increased Costs:
   • Avoiding the Red Sea means abandoning one of the most common global shipping routes from Asia to Europe.
   • Approximately 40% of Asia-Europe trade normally transits the Red Sea.
   • Ships that shun the Red Sea must instead sail around the Horn of Africa, which can cost $1 million more round trip in additional fuel costs2.
4. Surge in Shipping Rates:
   • The Suez Canal, which handles about 30% of global container trade, has seen disruptions due to the Red Sea crisis.
   • Shipping costs have increased significantly, causing prices on some routes—particularly from Asia to Europe—to surge nearly five-fold.
   • This impacts global trade networks and economic stability3.

In summary, the Red Sea conflict has disrupted trade, increased shipping costs, and forced companies to reroute their vessels, affecting supply chains and global commerce123.