Impact of Houthi Rebel Attacks on Global Shipping and Trade

The economic impact of Yemen’s Iran-backed Houthi rebel activities on global trade has been significant, according to a recent assessment by US intelligence officials. Attacks on commercial ships in the Red Sea led to a 90% drop in container shipping between December and February, affecting at least 65 countries and major energy and shipping companies.

The Pentagon’s Defense Intelligence Agency (DIA) found that companies like British Petroleum, Maersk, and Shell had to change their shipping routes, adding significant costs and delays to their operations. Many ships opted to travel around South Africa’s Cape of Good Hope, adding thousands of kilometers and extra days to their journeys.

The report also highlighted the impact on humanitarian efforts, with aid to Sudan and Yemen facing weeks-long delays due to the attacks. Shipping insurance premiums for the Red Sea route have skyrocketed, making it more expensive for companies to transport goods through the region.

In response to the attacks, the US and UK launched airstrikes against rebel targets in Yemen and imposed sanctions. Washington also established Operation Prosperity Guardian, a naval coalition to protect international navigation in the Red Sea. However, the attacks have continued despite these efforts.

The conflict has also affected India’s trade, with roughly 80% of merchandise trade with Europe passing through the Red Sea. Key products like crude oil, auto parts, and textiles are impacted, leading to higher costs and longer travel times. The disruptions in trade routes could have a significant impact on India’s capital goods sector.

Meanwhile, the Panama Canal has managed to avoid a shipping crisis that could have disrupted $270 billion in global trade each year. Through careful water management and a stroke of luck, the canal has been able to increase daily ship crossings and reduce wait times for shippers. If rainfall continues as expected, the canal could return to full capacity next year, easing the strain on global trade routes.