5 MINUTES AGO: Iran Gets Ready To Take Out The West After This, Tensions Take A Toll

5 MINUTES AGO: Iran Gets Ready To Take Out The West After This, Tensions Take A Toll

#redsea #trade #oil

In a region over a thousand miles away from Gaza, a shipping crisis is unfolding, and it has the potential to escalate the Israel-Hamas conflict into a global issue affecting the world economy. Since December 15th, four major shipping companies – cma cgm, Hapag-Lloyd, Maersk, and msc – have suspended their services in the Red Sea, a critical route for traffic from the Suez Canal. The reason behind this disruption is the increased attacks by Iran-backed Houthi militants armed with advanced weapons.

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Now, why is this particular part of the Red Sea such a big deal? Picture it like a bustling traffic jam, but on water. This super busy channel, just south of the Suez Canal, connects Europe to Asia and East Africa. The narrow spot causing trouble is the Bab el-Mandeb strait, about 20 miles wide, where the Houthi rebels are creating havoc.

About 12% of the world's trade, including a significant 30% of global container traffic, moves through the Red Sea. This disruption involves billions of dollars worth of goods and supplies every year, impacting gas prices, electronics availability, and overall global trade.

Cause of the Red Sea Crisis

The Bab al-Mandab strait, situated between Africa and the Arabian Peninsula, sees around 12% of global trade and possibly 30% of global container traffic. Unfortunately, this crucial passage has become a no-go zone due to Houthi attacks, ostensibly in support of Palestinians in Gaza. The conflict has been ongoing, but it escalated sharply on December 15th when the Houthis threatened and attacked ships.

Global Trade Disruptions

A. Impact on major shipping routes

Faced with heightened risks to ships and crews, the global shipping industry is in emergency mode. Maersk and Hapag-Lloyd paused their services on December 15th, followed by cma cgm and msc on December 16th. The owner of the ship Palatium III mentioned that their vessels won't use the Suez Canal until the Red Sea passage is secure. Together, these four companies constitute 53% of the global container trade. Smaller operators may follow suit, impacting various sectors.

When ships reroute via the Cape of Good Hope, encountering bad weather and high waves is common, significantly affecting fuel consumption and refueling services.

B. Disruptions in maritime trade

The crisis has dual impacts on the world economy and the growing conflict in the Middle East as major countries aim to restore order. The Suez Canal brings significant revenue to Egypt, and a prolonged closure could increase trade costs, create supply chain problems, and raise insurance expenses. The Arabian Sea, where one-third of the world's seaborne oil supply passes through, faces higher economic costs if the security crisis affects shipping.

C. Consequences for international businesses

Shipping giants like Maersk and MSC are adjusting routes, the U.S. is forming a team for ship safety, and major players are avoiding the Red Sea. BP even halted Red Sea shipments of oil and gas. Finding suitable places for refueling is challenging, raising oil prices, freight rates, and insurance costs. Even with the U.S.-led coalition, uncertainty prevails on when shipping companies will feel safe navigating the Bab el-Mandeb strait again.

Escalating Oil Prices

There's a concerning potential for chaos if Iran attacks ships in the critical oil passage, the Strait of Hormuz. This could lead to a significant surge in global energy prices, benefiting oil-producing and exporting countries but burdening consumers and industries with higher freight and shipping costs.

World Economy at Stake

When BP stopped shipping through the Red Sea, oil and gas prices rose. Europe initially agreed to protect ships with the U.S., but the situation escalated, with French, British, and American warships intercepting Houthi missiles. The West appears entangled in a regional conflict, and caution is crucial to avoid worsening the situation.
Diplomatic Efforts and Resolutions

A. International responses to the crisis

Diplomacy could be a solution, recalling Saudi Arabia and the UAE's involvement in Yemen's civil war. The Saudis have agreed to a ceasefire, letting the Houthis control certain regions. A U.S.-led team is near Yemen, aiming to prevent Houthi attacks, with assistance from Egypt and Saudi Arabia. Despite these efforts, managing the crisis remains challenging.

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