NewsShell stops Red Sea navigation fearing Houthi attacks: What this means for global trade

Shell stops Red Sea navigation fearing Houthi attacks: What this means for global trade

Shell gas station signage.
Shell gas station signage.
Images source: © Adobe Stock | Tomasz
1:27 PM EST, January 16, 2024

The British firm, Shell, is the latest company forced to withdraw from the Red Sea due to attacks from Houthi fighters. If we look back, Iran-supported Yemeni rebels aimed at ships to compel Israel to pull out their troops from the Gaza Strip. Initially, it revolved around supplies connected to Tel Aviv, but after bombardments from the USA and Great Britain, the list of targets was expanded.

The Wall Street Journal disclosed Shell's decision on Tuesday. The newspaper mentioned anonymous sources. It discerned that the company had taken measures the previous week to stop all passages through the Red Sea, fearing that a successful assault might instigate a major leak in the region. Additionally, this situation puts tanker crews at risk.

So far, the British company has refrained from commenting on the matter. Previously, BP made the decision to discontinue navigation through the waterway and the Suez Canal. Qatari ships carrying liquefied natural gas are also avoiding the Red Sea.

Ongoing attacks in the Red Sea

The situation on this crucial trade route worsens almost daily. Bombardment of the Ansar Allah movement's positions in Yemen by American and British helicopters has not incapacitated the fighters. In fact, they are attacking a growing number of ships. On Tuesday, a Greek bulk carrier sailing from Vietnam to Israel came under attack.

The condition of the sea route, which used to account for 12 percent of global trade, is one of the subjects of behind-the-scenes dialogue at the ongoing World Economic Forum in Davos. Specialists predict that the interruptions will principally affect European consumers, as previously mentioned by for several weeks.

"The cost of goods into Europe from Asia will be significantly higher. European consumers will fill the pain... It will hit developed economies more than it will hit developing economies," Yuvraj Narayan, the CFO of DP World, an international logistics company based in the United Arab Emirates, said to Reuters.

"Two heads of international banking groups attending the World Economic Forum (WEF) in Davos said privately that they were worried the crisis might cause inflationary pressures which could ultimately delay or reverse interest rate cuts and jeopardise hopes for a U.S. economic soft landing," as reported by Reuters.

For now, entrepreneurs are primarily feeling the effects as they progressively start to suffer from a shortage of materials. For instance, in Spain, four factories owned by the French tire manufacturer, Michelin, plan to halt production for a second consecutive weekend due to delays in raw material shipments.

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