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It fueled a crisis The Red Sea The list includes global fears that inflation is likely to rise again if the crisis lasts for a long time, after a struggle led by global central banks with rising prices through interest rate increases.
Most ships were forced to take the Cape of Good Hope route, located south of South Africa, as an alternative route Bab al-Mandab Strait And the Red Sea, for fear of attacks that might be launched Houthi group Yemeni.
The Houthis target, with missiles and drones, cargo ships in the Red Sea that are owned or operated by Israeli companies, or that transport goods to and from Israel, “in solidarity with… Gaza strip“Since October 7, 2023, it has been exposed to a devastating Israeli war with American support.
Tensions in the Red Sea have entered a remarkable escalation phase since, on January 9, the Houthis directly targeted an American ship, followed by American strikes on Houthi sites.
The cost of shipping imported through the Bab al-Mandab Strait increased by rates reaching 170%. Due to Houthi attacks on ships linked to Israel and the United States, which prompted shipping companies to suspend all their flights through the strait.
Return of inflation
MSC, the largest shipping company in the world, alerted customers in a press release of additional price increases for some container traffic to the United States, starting next February 12.
Shipping company Honor Lane said in a separate statement that it expects the situation in the Red Sea to continue for up to 6 months, and perhaps even a year.
“If this is the case, we expect high freight rates and equipment shortages to continue until the third quarter of 2024,” she added. CNBC quotes Stephen Schwartz, Wells Fargo's executive vice president for global receivables and trade finance, as saying: Europe has felt the greatest impact from the situation in the Red Sea… The effects of rising prices are beginning to appear on commodities.
He added that container delays, reduced capacity, and longer transit times “are all (factors) affecting global shipping costs, which are beginning to affect American companies as the situation in the Red Sea continues.”
Europe and America
Estimates from the European Statistics Office expect that the Red Sea crisis will cause inflation to rise by half a degree Celsius over the first and second quarters of 2024.
In Europe, the Red Sea crisis is putting pressure on the hopes of the Eurozone economy, regarding the possibility of lowering interest rates during the current year, from the current historical peak of 4%.
With the aim of curbing inflation, the European Central Bank implemented 10 successive increases in interest rates, starting in July 2022, and while analysts were likely to reduce interest rates 6 times in 2024, the Red Sea tensions may postpone this reduction.
In the United States, inflation rose again to 3.4% last December, from 3.1% the previous month, a rise from which the Red Sea tensions are still clear.
The US Federal Reserve's fears are that the Red Sea crisis will have additional impacts on inflation, starting this January, which means declining hopes for the hypothesis of an interest rate cut before the end of the first half of 2024.
Interest rates in the United States currently stand at 5.5%, the highest rate since 2001, according to US Federal Reserve data.
What about the Middle East?
In the Middle East, inflation expectations remain unclear in many economies, especially since the Houthi movement does not target all ships transiting the waterway.
However, what Jordan initiated may constitute a model for most Arab countries that import oil, in terms of the mechanism of dealing with tensions and anticipating any effects on the supply of goods.
On January 15, Jordanian Prime Minister Bisher Al-Khasawneh directed the ministries and relevant authorities in the Kingdom to take measures and procedures to deal with the potential inflationary effects on the local market. Due to developments in the Red Sea.
Al-Khasawneh said in a statement, “We have directed to provide ample and sufficient stock for all basic materials, and to maintain the prices of these basic materials until the end of the month of Ramadan (between next March and April) at least, regardless of the costs we may incur related to that.”
He directed the tightening of supervisory tools in the markets and “precautions and ensuring that we continue to maintain a safe strategic stock of wheat, barley, and all basic materials.”
