The Washington Post has reported that the Houthi attacks on commercial vessels in the Red Sea are posing a significant threat to the U.S. and global markets.
The attacks are causing delays in shipping times and an increase in the prices of goods.
The Houthis, based in Yemen, have initiated several attacks on vessels in the Red Sea since October 7. These attacks are part of their retaliation efforts against Israel and its allies. As a result, commercial vessels are now forced to take longer routes to avoid the Houthis, leading to delays and higher shipping costs. These increased costs are expected to drive up the prices of consumer goods in the U.S. and globally, as reported by the Post.
Major shipping companies such as COSCO, Maersk, and CMA CGM, along with several fuel tankers, previously used major trade routes in the Red Sea that connected Africa and Asia. However, the recent surge in Houthi attacks has compelled these vessels to reroute around South Africas Cape of Good Hope. This diversion adds thousands of miles and potentially weeks to a vessels journey, according to the Post.
Ryan Petersen, CEO of Flexport, told the Post, Its about an 8 percent longer journey, which is going to drive prices up quite a bit for ocean freight thats a material impact on prices for the goods themselves. Petersen further noted that the increased shipping costs would affect the prices of most of the stuff that you see in stores.
The delays in shipping times also mean that some goods may no longer be in season when they finally reach their destination, making them less profitable for retailers and wholesalers. George Kochanowski, CEO of shipping container company Staxxon, told the Post, You cant sell Valentines Day cards on St. Patricks Day.
The Post reports that U.S. and other international consumers who rely on goods delivered through the Red Sea will bear the brunt of these increased costs and delays. Richard Danderline, CFO of Staxxon, told the Post that while the immediate consequences affect companies that previously shipped through Red Sea routes, the compounded traffic will ultimately metastasize to the entire world.
In December, U.S. Department of Defense Secretary Lloyd Austin announced the formation of an international task force to counter the Houthi aggression in the Red Sea. The Houthis have launched over 100 attacks against ten commercial vessels and managed to hijack one ship before returning it to a Yemeni port in November.
There is no set timeline for the duration of the Houthi attacks. However, a Pentagon spokesperson told the Post that the U.S. maintains its right to defend itself and its interests.
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