Israel-Hamas war threatens global shipping as risk of wider conflict intensifies

Shipping companies are diverting their cargo away from the Red Sea as attacks by the Houthi rebel group in Yemen intensify in response to the ongoing siege of Gaza.

The attacks by the Houthi rebels, officially known as Ansar Allah, are now sparking confrontations in other parts of the Middle East, and U.S. diplomats are moving to reassure allies and stanch a wider conflict. 

“The Houthis will bear the responsibility of the consequences should they continue to threaten lives, the global economy, and free flow of commerce in the region’s critical waterways,” the U.S., Japan, the United Kingdom, Germany and eight other countries said in a joint statement Wednesday.

There have been 25 attacks since Nov. 18 against merchant ships moving through the Southern Red Sea and Gulf of Aden, Vice Adm. Brad Cooper, commander of the Bahrain-based U.S. 5th Fleet, told reporters Thursday.

In December, the U.S. launched naval operation “Prosperity Guardian” along with the U.K., Bahrain, Canada, France, Italy, the Netherlands, Norway, Seychelles and Spain to protect commercial ships from attacks by the Houthis.

Pentagon officials have been keeping in near-constant contact with merchant ships at sea using a tactical communications network, a senior defense official told The Hill on Thursday. 

The U.S also sunk three small Houthi boats Sunday following an attack on a merchant ship, prompting Iran to send its Alborz destroyer to the Red Sea the following day.

But the Houthis remain unbowed, vowing to continue their attacks in response to the bombardment of Gaza by Israeli forces. More than 22,000 Palestinians have been killed and more than 57,000 have been injured during the siege of Gaza, according to the Gaza health ministry. 

The siege was prompted by an Oct. 7 attack by Palestinian militant group Hamas, which killed more than 1,000 Israelis and took hundreds more hostage.

“Yemeni naval operations are ethical and will continue until the genocide crimes in Gaza are stopped and food, medicine and fuel are allowed to enter its residents,” Ansar Allah spokesperson Mohammed al-Bukhaiti wrote Wednesday on X, the platform formerly known as Twitter.

“We advise the countries that threatened Yemen in their joint statement to seek to stop crimes in Palestine, not to protect their perpetrators, and to address the causes of the problem, not its consequences,” he wrote.

Economic fallout could have a ‘significant impact’ 

The economic fallout from the naval hostilities is growing as shipping giants redirect their cargoes around Africa as opposed to sending them through the Suez Canal, Red Sea and Gulf of Aden.

Shipping costs are spiking across various indexes, including the Shanghai Containerized Freight Index, one of the industry standards, which hit 1,759 points Wednesday.

That’s up from recent levels around 1,000 but still way below the five-year peak of more than 5,100 points reached during the supply chain crunch in January 2022 that was set off by the pandemic.

Shippers are not happy about the security situation and its effect on their businesses.

“[The] Red Sea task force [is] still proving insufficient,” Judah Levine, head of research at the logistics platform Freightos, wrote on the company blog Wednesday. 

“The Houthis seem undeterred as attacks continued last week and as recently as Saturday, marking 23 commercial vessels targeted since mid-November, with the latest targeted vessels having no apparent ties to Israeli ownership or trade.”

The primary Suez Canal trade route between Europe and Asia shepherded 15 percent of global container trade in 2022, according to data from the United Nations Conference on Trade and Development, an equivalent of 24.2 million 20-foot containers.

The Red Sea route saves ships 10 days of transit, during which shippers pay additional fuel costs, seafarers’ wages, and other forms of overhead.

“This could mean higher costs for goods,” International Maritime Organization spokesperson Natasha Brown said in an email to The Hill. “If more ships divert, there could be significant impact.”

Economists are downplaying the immediate impact of the extra costs, noting they have a small chance of being felt directly by consumers.

“Following attacks on commercial shipping in the Red Sea, container ships are diverting to taking the longer Cape of Good Hope route from Asia to Europe. This has provoked suitably sensational comments about the longer time taken and the associated increase in freight costs. It all sounds dramatic and inflationary. It really isn’t,” UBS economist Paul Donovan wrote in a Friday analysis.

“Where higher costs are shipping specific, as at the moment, the inflation impact is very small,” he added.

Shippers steer clear of Red Sea at steep cost

Shipping company Maersk now lists dozens of vessels diverted around the Cape of Good Hope following a Dec. 30 incident with one of its ships, the Hangzhou.

“An investigation into the incident is ongoing and we will continue to pause all cargo movement through the area while we further assess the constantly evolving situation,” the company said in a Tuesday statement.

Shipper MSC confirmed a Dec. 26 attack on its ship the MSC United VIII while transiting the Red Sea and said it was told to engage in evasive maneuvers by a nearby coalition warship.

About 30 ships belonging to German shipping company Hapag-Lloyd have had to be rerouted since Dec. 18, spokesperson Nils Haupt told The Hill.

“[The total volume of affected shipments is] difficult to say – but if you take 30 ships with very different sizes, but that make an average of 12,000 [20-foot equivalent units] per vessel, you will see that we talk about nearly half a million – and that’s only us,” he said.

A brewing diplomatic crisis could worsen the economic fallout

Beyond the Red Sea, the conflict has repeatedly crossed the Israeli border into Lebanon. Senior Hamas leader Saleh al-Arouri was killed in a suspected Israeli strike in the country Tuesday, prompting threats of retaliation from Hassan Nasrallah, the leader of the Iran-backed political group Hezbollah.

Israeli Interior Minister Itamar Ben-Gvir also wrote Tuesday on X about “the migration of hundreds of thousands from Gaza,” further inflaming tensions.

“This is a very dangerous moment. A region-wide war appears more likely by the day,” U.S.-Iranian relations expert and advocate Trita Parsi wrote online Wednesday. “As Israel’s attacks continue, Tehran’s long-game strategy is coming under increasing strain as more voices in Iran argue that the absence of a strong response undermines Iran’s deterrence.”

Secretary of State Antony Blinken announced travel to the Middle East on Thursday as the conflict between Israel and the Palestinians threatens to further engulf the region.

He’ll engage in shuttle diplomacy, making stops in Turkey, Greece, Jordan, Qatar, the United Arab Emirates, Saudi Arabia, Israel, the West Bank and Egypt, the State Department said in a Thursday statement.

“Throughout his trip, the Secretary will underscore the importance of protecting civilian lives in Israel and the West Bank and Gaza; securing the release of all remaining hostages; our shared commitment to facilitating the increased, sustained delivery of life-saving humanitarian assistance to civilians in Gaza and the resumption of essential services; and ensuring that Palestinians are not forcibly displaced from Gaza,” the State Department said.

Brad Dress contributed.

Updated at 6:51 a.m. ET