BP announced on Monday that it will be suspending gas and oil shipments through the Red Sea due to a surge in attacks on ships in the region originating from Houthi-controlled areas of Yemen.
This decision by the energy giant has caused global oil prices to rise, raising concerns that geopolitical tensions in the Middle East could impact energy supplies. BP stated, "In light of the deteriorating security situation for shipping in the Red Sea, bp has decided to temporarily pause all transits through the Red Sea."
According to Bloomberg, global oil prices experienced a significant increase, with Brent and West Texas Intermediate crude rising by nearly 3% to $73.49 and $78.68, respectively.
As a result of the recent rise in missile and drone strikes on ships and oil tankers from Houthi-controlled areas, at least six energy and shipping companies have halted traffic in the Red Sea. The Houthis, an Iran-backed rebel group based in Yemen, have been targeting Israel with a series of drone and missile strikes since Hamas' Oct. 7 attack.
The Houthis' Attacks Prompt Shipping Companies to Pause Activities in the Region
The recent escalation of attacks by the Houthis has led to several of the world's largest shipping companies, including CMA CGA, Equinor, Evergreen, Hapag-Lloyd, Maersk, Orient Overseas, and ZIM, to temporarily halt their activities in the region. These attacks have targeted ships that have no clear ties to the conflict, causing concern among the shipping industry.
The Bab el-Mandeb Strait, which separates Africa from the Arabian Peninsula, is a crucial maritime link between the Mediterranean and the Indian Ocean. Approximately 10% of global trade passes through this area, highlighting its significance in international commerce.
The Suez Canal, located at the northern end of the Red Sea, serves as the shortest shipping route connecting Asia and Europe. As a result, it is a popular commercial trade route. However, the recent disruptions caused by the Houthi attacks have prompted concerns about the reliability of this route. If access to the shortcut is restricted, ships will have to travel around the Cape of Good Hope at the bottom of Africa, leading to longer voyages and increased shipping costs.
In an effort to mitigate the disruptions to commercial trade, the United States has taken action by shooting down more than a dozen Houthi-launched drones. However, this response could potentially escalate geopolitical tensions, as noted by Height Securities analyst Jesse Colvint.
