Brent D. Sadler
The Iran-backed Houthis have been assaulting shipping in the Red Sea since October, driving up global shipping costs and creating ripple-down effects on U.S. markets and consumers. Yet, with the recent IRGC seizure of the Portugal-flagged MSC Aries in the Strait of Hormuz, the Red Sea may not be the only waterway impacted by Iran and its proxies.
The economic impacts of the Red Sea and other disruptions so far are largely imperceptible, but they will compound over time. Shipping companies will be the first to feel these effects, followed by manufacturers, retailers, and finally, the consumer.
The Red Sea is one of the most important arteries in the global shipping system, with one-third of all container traffic flowing through it. In addition, 12 percent of seaborne oil and 8 percent of liquified natural gas (LNG) travel through the Suez Canal. But after four months of attacks, half of the global shipping fleet that regularly transits the Red Sea is rerouting around the Cape of Good Hope. Added fuel costs, long delays, and rising insurance premiums are driving costs on shipping companies to the tune of billions of dollars.
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