Recent increases in attacks by Houthi militants of Yemen, supported by Iran, targeting vessels navigating the Bab al-Mandab Strait and the Red Sea have heightened security concerns for ships transiting the Suez Canal.
The world’s biggest container shipping companies have paused Red Sea transit due to safety concerns. In the past few days, MSC, Maersk, CMA CGM, and Hapag-Lloyd have all announced decisions to avoid the Suez Canal.
Oil giant bp also announced a decision to pause all shipments through the Red Sea because of increased attacks on commercial vessels by Houthi militants. The company called it a “precautionary pause” because of the “deteriorating security situation.” Oil and gas prices both surged on the news.
S&P Global Commodities at Sea data indicates that due to the escalated attacks by Houthi rebels in the area, at least three LNG carriers intending to transit the Suez Canal have chosen alternative, longer routes. This diversion includes a tanker transporting cargo from the Freeport LNG plant in Texas.
Analysts have warned about the repercussions on supply chains, freight costs, and transit times due to the disruption of this crucial trade route between East and West. As a result of the Suez Canal blockage, certain ships are opting for reroutes via the Cape of Good Hope in Africa, resulting in up to an additional 3 weeks in journey times and increased fuel costs.
Goldman Sachs, however, stated that the disturbance to energy flows in the Red Sea is unlikely to significantly impact crude oil and LNG prices. The availability of vessel redirection options suggests that production is not expected to be directly affected.