The global threat posed by Houthi attacks on shipping

Supply chains are being disrupted, shipping rates are spiking. Eventually, it’s consumers who will have to pay the price for the maritime menace in the Red Sea.

- Vileraiers Khanna

When the horrific conflict between Israel and Hamas in Gaza erupted last October, most analysts predicted that its global economic impact would not be significant. That is no longer true.

The danger of its fallout specifically attacks by Yemen-based Houthi militants on commercial ships in the Red Sea setting off a wider conflict with dire global ripple effects escalated sharply last week.

On Jan 12, a US-led coalition launched a barrage of military strikes on nearly 30 sites in Yemen. A smaller strike followed the next day. Both came after the Houthis ignored repeated warnings from the US and other governments to stop their attacks on shipping in the area.

While initial assessments suggest the air strikes damaged or destroyed most of the targets, the Houthis have retained about three-quarters of their ability to fire missiles and drones at ships transiting the Red Sea, US officials told The New York Times. The Houthis have vowed to retaliate.

The militia, which is backed by Iran, says its attacks are in support of the Palestinians in Gaza. The actions have had a devastating impact on shipping costs, exporters, importers and retailers, especially in Asia, Europe and the Middle East. Supply chains, which had only recently recovered after three years of the Covid-19 pandemic, have been upended yet again.

Mr Vincent Clerc, the head of shipping giant AP Moller-Maersk, warned last week of the costs of diverting ships, especially if the forced diversion of container ships is prolonged. "It's unclear to us if we are talking about re-establishing safe passage into the Red Sea in a matter of days, weeks or months... It could potentially have quite significant consequences on global growth," he told The Financial Times.

A typical shipment from Asia to the US is now facing delays of 10 to 12 days, says a shipping broker for US importers and exporters.