How Red Sea Crisis Raises, Inflation, Supply Chain Worries Anew

By attacking ships plying the Red Sea, Yemen’s Iran-backed Houthi rebels have caused the biggest disruption to global trade since the Covid-19 pandemic and provoked a military response, including US and UK airstrikes on Yemen. The Houthis say they are acting in solidarity with Palestinians amid the war between Israel and the militant group Hamas. The dangers in the Red Sea have increased costs for operators still plying its waters and prompted shipping companies to reroute much of the sea’s normal container, oil and natural gas traffic around the southern tip of Africa, a lengthier and more expensive journey. That’s raised concerns that the crisis will feed inflation and resurrect supply-chain snarls.

Since the middle of November the Houthis, who control northwestern Yemen, have launched a string of attacks on shipping that have included firing drones and missiles. At least 16 ships have been struck, according to Ambrey Analytics, while others have seen near misses and there’s also been gunfire from small boats. They’ve tried to board and take control of some vessels, largely without success, although they did manage to capture the Israeli-owned car carrier Galaxy Leader in November. Many of the attacks are launched from near the Bab el-Mandeb strait that ships pass through to enter the Red Sea from the Indian Ocean. At its narrowest point, the strait, separating Yemen and Djibouti, is only 18 miles (29 kilometers) wide. The Red Sea is the only route to the Suez Canal, linking some of the world’s biggest consumers of tradable goods in Europe with big suppliers in Asia.