A new Suez crisis threatens the world economy
Houthis, in order to re-establish free passage. Bab al-Mandab is a narrow strait between Africa and the Arabian Peninsula through which an estimated 12% of global trade by volume normally flows, and perhaps 30% of global container traffic. It has become a no-go zone as the Houthis, based in Yemen, attack shipping, ostensibly in support of the Palestinians in Gaza.
The strikes have been going on for weeks but have now escalated sharply. On December 15th the Houthis threatened to attack one ship, struck another one with a drone and launched two ballistic missiles at the MV Palatium III, one of which hit the vessel. The attack on the Palatium III was the first ever use of an anti-ship ballistic missile.
All the ships were Liberian-flagged. On December 16th the American naval vessel, USS Carney (pictured), shot-down 14 drones over the Red Sea while a British ship, HMS Diamond, destroyed another. Faced with a soaring risk of ships being crippled and their crews killed, the global shipping industry is switching into emergency mode.
On December 15th Maersk and Hapag-Lloyd paused their services. On December 16th CMA CGM followed, as did MSC, the owner of the Palatium III, which said that its ships would not use the Suez Canal in either direction “until the Red Sea passage is safe", and that some vessels would be rerouted via the Cape of Good Hope. Together these four companies account for 53% of the global container trade.
Smaller container operators, as well as dry-bulk carriers and oil tanker firms, may now follow their lead. The crisis has two big implications; one for the world economy and the other regarding the risks of military escalation in the Middle East as Western countries try to re-establish order. Start with the
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