In recent weeks, the international scene has been shocked by a series of premeditated and carefully planned attacks in the Red Sea, carried out by Yemen’s Houthi rebels. These tactics have raised concerns about global economic stability and the possibility of escalation in one of the world’s most important trade routes.
Who are the Houthis?
The Houthis, also known as Ansarallah, have been a key player in the Yemeni civil war for almost a decade. Their movement originated in the 1990s as a response to the ruling Sunni regime, aiming to represent and defend the interests of the Zaidi subsect of Shia Islam, which had been historically marginalized in Yemen. Although the Houthis have been involved in the Yemeni civil war for many years, their recent actions have attracted international attention.
Economic Repercussions
As a major hub for global maritime trade, the Bab al Mandeb Strait, which controls access to the southern Red Sea, has seen a 70% decrease in shipping traffic since mid-November. This has disrupted the timely delivery of goods, causing delays and stoppages in various industries.
From furniture giant Ikea to auto manufacturer Tesla, companies are facing challenges in meeting their production targets due to delayed deliveries of raw materials and merchandise. This has resulted in increased costs and reduced efficiency, causing a domino effect on the supply chain.
Additionally, the ongoing drought in the Panama Canal has further exacerbated shipping delays and has forced companies to seek more expensive alternative routes. This, coupled with the increased rates by shipping companies to cover additional costs and insurance premiums, has raised concerns about inflation. The Oxford Economics analysis center estimates that the current crisis in the Red Sea could add seven tenths to global inflation by the end of this year, if the situation persists.
As the Red Sea remains a critical passage for global trade and commerce, any prolonged disruption could have severe repercussions on the global economy. In the face of this crisis, it is imperative for all parties involved to find a swift and peaceful resolution before the economic fallout becomes even greater.