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22 June, 2024
 
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Major shipping firms redirect routes as Red Sea attacks intensify

Suspends Red Sea oil transit amid escalating tensions

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In a significant move with potential global repercussions, major shipping companies, including MSC, Maersk, and Hapag-Lloyd, opt to steer clear of the Red Sea route.

As Barrons reports, Yemen's Houthi rebels, backed by Iran, unleash a barrage of drone and missile attacks, targeting vessels navigating the strategic Bab al-Mandab strait. The rebels, not internationally recognized, claim their actions aim to pressure Israel amid the conflict with Hamas in Gaza.

Despite Western warships intercepting many attacks, Houthi rebels report striking two "Israeli-linked" vessels, sparking heightened tensions. This prompts five of the world's top six shipping companies to announce Red Sea avoidance.

BP joins this stance, suspending oil transit, while Cosco, the fourth-largest shipping firm, remains undecided.

The Red Sea, a vital link from the Indian Ocean to the Mediterranean, sees around 20,000 annual ship passages. The International Chamber of Shipping reveals that 12% of global trade relies on this route.

Avoidance forces ships into a lengthy detour around Africa, incurring significant time and fuel costs.

Andreas Krieg, a professor at King's College London, estimates a potential six-day delay and extra costs of $300,000-400,000 for ships traveling from Asia to Europe. Paul Tourret, head of ISEMAR, warns of a modest price increase in goods, impacting supply chains in the coming months.

Egypt faces economic repercussions as Suez Canal fees contribute significantly to foreign currency earnings. Torbjorn Soltvedt from Verisk Maplecroft notes the timing of this revenue drop amid Egypt's currency crisis and high inflation.

Meanwhile, oil prices surge nearly three percent following the attacks and BP's transit suspension. The situation unfolds with broad implications for global trade and regional stability.

[With information sourced from Barrons]

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Cyprus  |  EU  |  RedSea  |  shipping  |  ocean

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