On December 30, 2023, the Singapore-flagged Maersk Hangzhou, owned by Danish company Maersk Line, came under missile and subsequent boat attacks by Houthi rebels in the Red Sea. The U.S. Navy responded by using helicopters to destroy three of the four ships used in the assault. Maersk, the world’s largest shipping company, immediately announced it was suspending operations in the sea indefinitely, rejoining major Western shipping firms and energy companies in redirecting shipping away from the region.
Houthi attacks have occurred regularly since October 2023 after the group declared it would target ships associated with Israel. In response, Washington announced a task force on December 18—Operation Prosperity Guardian—to combat the attacks, and imposed sanctions on Houthi funding networks, mainly linked to Iran. But the difficulty in securing the Red Sea’s narrow waters and the bottleneck at the Suez Canal have laid bare the fragility of global shipping, with an estimated 20 percent decline in ship traffic through the Red Sea in December 2023. Daily container vessel traffic through the Suez Canal had meanwhile halved by early January 2024, compared to a year before.
The repercussions of redirecting shipping are being felt globally, with ocean cargo rates skyrocketing since the attacks began. By early January, the logistics company Freightos reported that rates for Asia-to-North Europe shipping had more than doubled to above $4,000 per 40-foot container. By mid-January, the cost of sending a 24-foot shipping container from India to Europe and the U.S. East Coast had risen from $600 to $1,500. Adding to the financial burden, surcharges ranging from $500 to $2,700 per container are anticipated, and rates for shipments from Asia to North America have also experienced significant hikes.
For those daring to navigate the Red Sea, insurance premiums have more than tripled from 0.2 percent to 0.7 percent of a vessel’s value per journey. Though consumers haven’t yet felt the brunt of rising prices, the specter of inflation looms in the coming weeks. The anticipated domino........