Global GDP to decline by ten percent because of Red Sea transport crisis

Global GDP may lose up to ten percent because of the growing number of rocket attacks in the Red Sea. Many large logistics and energy companies have already suspended the transit of goods along this route. The crisis has led to a sharp increase in the cost of cargo transportation services. Prices on literally all goods may rise in the near future all over the world. Much will depend on how long the hostilities in the Middle East are going to last.

Yemen's Houthi rebels from the Shiite paramilitary group Ansar Allah pledged to attack at every Israeli ship that travels through the Red Sea. They also attack any ship that travels either to or from Israeli ports. The crisis in the Read Sea sparked against the background of the ongoing war in the Gaza Strip, in which the Israeli Army (IDF) is confronting the Palestinian radical group Hamas.

Houthis use rockets and drones to attack ships. Their attacks in mid-December damaged several foreign tankers, including the Norwegian Strinda and Swan Atlantic, owned by Inventor Chemical Tankers. After these attacks, the management of the BP oil and gas giant decided to shut down the transit of goods in the Red Sea. Norway's state-owned energy company Equinor decided to take a similar step. Denmark's logistics giant Maersk announced the suspension of transit on the Red Sea route as well.

On December 19, the Pentagon announced the start of a multinational operation to protect the Red Sea. For Operation Guardian of Prosperity, the USA joined forces with the following states: Great Britain, Bahrain, Canada, France, Italy, the Netherlands, Norway, Seychelles and Spain. However, the allies have not succeeded much yet. Representatives of Ansar Allah have not announced their intention to stop rocket attacks on Israeli and foreign ships.

Many logistics companies redirect their cargo ships around the African continent. Instead of going directly through the Suez Canal, ship owners now have to find alternative channels. This may increase cargo delivery time by 14-15 days.

A sharp increase in delivery time may disrupt global maritime trade. The transport load on final destination ports may grow, DHL said. Montrone experts believe that updates in arrival dates of logistics ships may cause a large-scale transport crisis. One may experience container shortages in high-demand areas in the Asian region due to longer delivery times for such equipment.

Global carriers have already redirected cargo worth $65 billion from the Red Sea. The figure may increase in the future, maritime logistics market players say.

The threat of rocket attacks in the Red Sea has already driven up the cost of ship insurance, whereas risks to global shipping will be preserved over a medium-term horizon, Corey Ranslem, chief executive of maritime security company Dryad Global said.