Oil price gains and shipping headaches after Red Sea attacks risk new wave of inflation

A new crisis is brewing in one of the world’s trade arteries, threatening to snarl supply chains, and push up oil prices and broader inflation at a time of slowing economic growth.

A new crisis is brewing in one of the world’s trade arteries, threatening to snarl supply chains and push up oil prices and broader inflation at a time of slowing economic growth. The recent escalation in attacks on commercial ships by Yemen’s Houthi militants has led oil giant BP (BP) and four of the world’s biggest container shipping companies to pause transit through the Red Sea, which means they also have to avoid the crucial Suez Canal. Around 10-15% of global trade — and 30% of container trade — passes through the waterway connecting the Red Sea to the Mediterranean Sea. Some ships are already being rerouted around the southern tip of Africa and a prolonged effective closure of the Suez Canal will increase freight costs and delivery times. “The Red Sea, especially with the Suez Canal, is like a superhighway for shipping containers, connecting different parts of the world, particularly Europe, Asia and Africa,” said Christian Roeloffs, CEO of Container xChange, a platform that facilitates container leasing. “A huge amount of Europe’s energy supply, palm oil and grain come through the Suez Canal Waterway.” Such is the importance of the route that the United States launched a naval mission Monday with nine other countries to protect commercial shipping in the Red Sea. “The Red Sea is a critical waterway that has been essential to freedom of navigation and a major commercial corridor that facilitates international trade,” US Secretary of Defense Lloyd Austin said as he announced the initiative.