Yemen's Houthi rebels are intensifying their attacks on vessels in the Red Sea, with three commercial ships and a US military unit having been targeted in the middle of December. The surge in aggression is a consequence of the regionalisation of the Israel-Hamas conflict and poses a threat to global energy markets.

Houthi rebels have attacked a dozen container ships and energy tankers in the Red Sea in recent weeks, which could lead to an international military response. The US has already ordered three destroyers in the Arabian Sea to the Bab-el-Mandeb, and these are currently on their way to the hot spot. 

Recent military incidents in straits of Bab-el-Mandeb map DAMIEN SYMON

Major shipping companies, including AP Moller-Maersk and Hapag-Lloyd, have temporarily halted transiting the critical Bab-el-Mandeb chokepoint in the Middle East, one of the world’s most important narrow straits through which oil and other goods are transported to the international markets, due to intensified attacks by Yemen's Houthi militants on Israeli shipping, S&P Global reports. These disruptions are raising concerns about global trade flows.

Bab-el-Mandeb ("Gate of Tears" in Arabic) is a strait or chokepoint located between Djibouti in Africa and Yemen at the southern tip of the Arabian Peninsula. It connects the Red Sea to the Gulf of Aden and ultimately to the Arabian Sea.

Houthi forces claim to have forced a ship destined for Israel to turn back, and are now threatening all ships passing through the Bab-el-Mandeb. The US is considering targeting Houthi forces to prevent further attacks, marking a part of the broader regional escalation of the Israel-Hamas conflict.

Recent attacks include ballistic and drone strikes on Panama-flagged Aom Sophie II and Number 9, both partially Japanese-owned bulk carriers. A Bahamas-flagged bulk carrier faced an attempted drone attack, later sustaining damage from a missile strike, with the USS Carney destroyer intervening.

AP Moller-Maersk, accounting for 15% of the global container freight market, has suspended voyages passing through Bab-el-Mandeb until further notice. Hapag-Lloyd, controlling 7% of the container market, also paused traffic through the Red Sea until at least December 18 after one of its ships, Al Jasrah, was attacked by Houthi rebels.

The US Secretary of State condemned the attacks as "totally unacceptable" and hinted at the consideration of an international task force to ensure the safe passage of ships in the Red Sea. The US pledged to "consider all appropriate responses," holding Iran responsible for rising tensions and emphasising the attacks' direct threat to international commerce and maritime security.

Houthi rebels openly declared hostility towards Israel following the war declaration against Hamas, consistently targeting Israeli-linked ships in recent weeks. General Yahya Saree, the Houthi military spokesman, stated: "The Yemeni armed forces continue to prevent Israeli ships from navigating the Red Sea (and Gulf of Aden)" until Israel ceases its attacks in Gaza. The situation remains dynamic, with global concerns growing over the impact on maritime security and energy trade routes.

The Liberia-flagged Al Jasrah, a Hapag-Lloyd containership, caught fire in the Red Sea on December 15 after being hit by a missile from Houthi rebels. This incident occurred a day after the Maersk ship Gibraltar narrowly escaped a Houthi cruise missile attack on December 14.

The suspensions indicate a shift among major ship charterers, who had previously deployed armed guards to secure passage through the Bab-el-Mandeb. The Houthi threat to attack ships with Israeli ownership or bound for Israeli ports has resulted in attacks on various commercial vessels, irrespective of their connection to Israeli trade.

"The pattern I see [in the] last few days is more attacks on all these container line big boys like MSC, Maersk, NYK Line, Hapag-Lloyd. If you scare them, then you stop hundreds of their ships," said Luv Menghani, a shipbroker with BluePeak Commodities and Shipping.

Maersk's decision to avoid the Red Sea suggests an escalation in response to Houthi attacks, according to Gregory Brew, an analyst with Eurasia Group. Maersk’s shares jumped 7% on the news as investors anticipated higher transport costs as a result of the longer routes that ships will now have to travel. The attacks appear to be broadening and becoming more indiscriminate, with the Houthis targeting major container shipping companies, S&P reports.

The Bab-el-Mandeb chokepoint handles 10% of global seaborne oil flows. The recent attacks prompted AP Moller-Maersk and Hapag-Lloyd to advise their fleets on December 14 to use the longer Cape of Good Hope route, adding 40% to the voyage distance.

Some carriers had already avoided the Suez Canal in recent weeks due to security concerns arising from the Middle East conflict. The decision to reroute ships via the Cape of Good Hope has further affected containership traffic in the Red Sea.

War risk surcharges are being imposed on freight rates, with a container bound for the Middle East now attracting a surcharge of $100/teu on dry and reefer cargo. Zim Integrated Shipping Services (Zim), an Israeli carrier, increased freight rates on its Asia-Mediterranean service to cover rising security costs.

The threat to shipping has also affected charterers delivering liquefied petroleum gas (LPG) to Yemen. Crew safety concerns have led to a reluctance among ship charterers to set sail for Yemen, affecting imports of LPG. Tanker rates for Yemen are rising amid the escalating tensions, hitting the shipping industry across various fronts.

Red Sea and Suez chokepoints map 

Suez Canal

The Suez Canal has also seen disruptions recently due to lower water levels following the hottest summer on record in 2023, and an accident that left a ship stuck in the middle of the waterway. 

The grain ship MV Glory ran aground near the city of Qantara, in the Suez Canal province of Ismailia, in January and had to be refloated.

Then in May the Xin Hai Tong 23, a 190-metre bulk carrier, also ran aground in the canal but was quickly freed by tugboats from the Suez Canal authority.

The most serious accident in the canal in recent years was when the Panama-flagged Ever Given, a colossal container ship, crashed into a bank on a single-lane stretch of the canal in March 2021 and blocked the waterway for six days. The Ever Given was freed in a giant salvage operation by a flotilla of tugboats. The blockage created a massive traffic jam that held up $9bn a day in global trade and strained supply chains already burdened by the coronavirus pandemic.

Now the deteriorating security situation in the Middle East is adding fresh concerns to shippers using the Suez, including ships carrying Ukrainian grain that use the canal to reach customers in Africa and Asia. 

Russia has also been forced to make more use of the canal after the twin oil embargoes were imposed on sales of Russian oil and products in December 5 and February 5 respectively.

While it is true that the biggest oil tankers, the VLCCs,  cannot fit through the Suez Canal, many partially discharge into the Sumed pipeline and top-off on the other side. The Suez-Mediterranean pipeline (Sumed) has the capacity to carry 2.5mn barrels per day (bpd) of oil.

The pipeline was financed by a consortium of Arab countries, primarily Saudi Arabia, Kuwait and Egypt, and completed in 1977. Construction started in 1973 when the Egyptian government announced on October 1 that it had awarded a $345.4mn contract for building the pipeline to the privately owned Bechtel Corporation of San Francisco.

In the first half of 2023, northbound crude oil flowing through the Suez Canal and Sumed pipeline had increased by more than 60% from 2020, as demand in Europe and the United States rose.

Southbound shipments through the Suez Canal rose significantly during 2021-2023, because of sanctions on Russia’s oil exports. Oil exports from Russia accounted for 74% of Suez southbound oil traffic in the first half of 2023, up from 30% in 2021.

The Suez Canal and Sumed pipeline remains one of the most important global chokepoints for crude oil, accounting for about 12% of total seaborne-traded oil in the first half of 2023 according to the EIA .

Africa oil chokepoints Cape of Good Hope vs Suez Canal map 

Hormuz Strait

On the other side of the Arabian peninsula, the Strait of Hormuz is another major chokepoint that is contiguous with Iran and carries a significant share of Middle Eastern oil transported from the Persian Gulf countries to the rest of the world. The straits have always been in focus as a potential flashpoint that could lead to a fresh military conflict in the Middle East between the US and Iran. Thirty percent of the world’s seaborne-traded crude oil passes through the Strait of Hormuz every day.

But attacks began at a lower level during the Trump presidency when Iran’s Revolutionary Guards captured a British-flagged oil tanker in the Gulf after Britain seized an Iranian vessel in July 2019. The strait has been at the heart of regional tensions for decades, and recently attacks have occurred in its vicinity and have targeted alternative routes for oil bypassing Hormuz.

In December, reacting to US plans to form a multinational taskforce “to provide a greater level of security through the Red Sea”, Iran’s defence minister warned: “if they make such an irrational move, they will be faced with extraordinary problems… Nobody can make a move in a region where we have predominance,” Reuters reported. Iran has taken to flying drones in the region, which has unsettled the US authorities.

In November Mayet, a Malta-flagged “container ship managed by an Israeli-controlled company, was hit by a suspected Iranian drone in the Indian Ocean, causing minor damage to the vessel but no injuries”.

Kerch straits

Most of Ukraine’s ports are on the Sea of Azov, and vessels have to transit the Russian-controlled Kerch straits to reach the Black Sea before passing through the Turkish controlled Bosphorus Straits to the Mediterranean Sea and on to the international markets.

Russia has imposed a naval blockade on Ukraine’s ports that has hampered the latter's exports of grain. This year Ukrainian farmers brought in a bumper harvest, but grain exports fell by a third as of December due to the problems in getting the grain to market by ship after Black Sea Grain Initiative was suspended on July 17.

Ukraine has found a temporary solution by using a corridor that hugs the Ukrainian coast and exits the Sea of Azov via the Danube, but even this route remains under threat of Russian bombers. 

Tensions in the Kerch straits flared in 2018 after Russia’s coastguard rammed a Ukrainian naval tug and arrested the crew, sending the Russian-Ukrainian relationship to a new low.

A traffic jam of ships quickly built up after Russia closed access to the Kerch Straits in an incident in 2018

Under the treaty on passage, Russia’s coastguard runs the access to the strait, but in what was seen by many as a provocation ordered by then President Petro Poroshenko, the Ukrainian vessel did not ask for permission to transit the strait, provoking the intervention of the Russian coastguard and causing a major international incident. Russia then closed the strait to traffic.

Transiting via the Mediterranean is also under threat after Russia expanded its naval presence after a decade’s hiatus due to the chaos that followed the collapse of the Soviet Union in 1991. Russia has expanded its presence in the Mediterranean by developing its naval base at Tartus in Syria, which gives the Kremlin a naval foothold in the Mediterranean Sea. Russia’s main warm-water naval base is at Sevastopol on  the Crimean peninsula, but its ability to field ships in the Mediterranean is limited by the Montreux Convention, which regulates the passage of military vassals through the Bosphorus, which effectively gives Turkey a veto over Russian military vessels entering and exiting the Black Sea.

In wartime, if Turkey is not involved in the conflict, warships of the nations at war may not pass through the Straits, except when returning to their base. When Turkey is at war, or feels threatened by a war, it may take any decision about the passage of warships as it sees fit.

However, Russia has a second warm-water port at Murmansk on the Kola Peninsula on its north-west coast that became a major supply entrepot during the WWII. But despite Russia having one of the longest coastlines in the world, it has extremely restricted access to the sea, due to pack ice that blocks its sea lanes for most of the year.

Oresund straits

Oil sanctions on Russia have failed. Not a single barrel of Russian oil has been sold at under $60 since the twin embargoes were introduced in December 5 and February 5, and the West has struggled to enforce the oil price cap sanctions. Oil revenues that are being used to fund Putin’s war in Ukraine continue to pour into Kremlin coffers.

As the West casts around for a mechanism to enforce the oil sanctions, one suggestion that was discussed as a possible addition to the recently agreed twelfth sanctions package was to blockade the narrow Oresund straits that are controlled by Denmark and give access to the Baltic Sea.

Denmark Oresund straits map

Since the EU embargo came into effect Russia no longer sends its oil on the short trip down the coast to Rotterdam, but now has to ship its oil from its port of Primorsk in the Gulf of Finland all the way to Asia. Nevertheless, some 70% of Russia’s oil exports still leave via the Baltic Sea and have to pass through the Oresund straits. The idea is that Denmark would police the traffic and stop and inspect every ship leaving the Baltic Sea to ensure that their cargo was compliant with the oil price cap sanctions.

The proposal was not adopted at the EU summit in December, as it remains very problematic. The main issue is that while Denmark does regulate maritime traffic through its territorial waters, under international maritime law, ships have the “right of innocent passage” through any other country's water, which allows them to pass without explicit permission or the need to register with the sovereign country that controls those waters. As long as Russian oil tankers engage in no military actions whatsoever, Denmark does not have the right to stop them.

If Denmark deployed its modest navy to force Russian ships to stop for inspection that is technically a naval blockade and that is an act of war – an act of war by a Nato country on Russian shipping, effectively ruling the scheme out as unworkable.

Straits of Taiwan

The waters between Taiwan and China is a major transport artery in SE Asia and has become the scene of rising temperatures as China continues to threaten a military invasion of the island. Taiwan has remained internationally a part of China since the revolution, but most Western governments have recognised the government as independent.

China has been rapidly building up its navy, which is now larger in size than that of the US, and is building artificial islands on top of reefs to expand its maritime territory in the region. In the latest of a series of continuous Chinese naval exercises, China's PLA-Navy aircraft carrier Shandong has spent months at sea sailing through the straits and around the islands in the Sea.

1123 Taiwan map military activity 

The US also has significant naval assets in the region and has recently agreed to open a new naval base in the Philippines, which has long-running maritime disputes over territory.

While much of the discussion focuses on a potential invasion of the island, in a bne IntelliNews podcast Professor Axel Schneider, the head of the sinology faculty at Goettingen University and Germany’s foremost China expert, said that a naval blockade of the island was more likely and would be devastating to the local economy, with knock-on effects for the whole of Asia, by impinging on international shipping traffic through the straits.

China wants control over Taiwan as part of its “one China” policy; however, Schneider argues that Beijing’s main motivation for regaining control of the island is that the maritime territory that comes with it would give Beijing access to deep waters close to its own coast.

China Taiwan Straits sea depth Bathymetry map WIKIPEDIA

The Taiwan straits are actually a fairly shallow 50m in depth all along China’s coast but drop down to around 1,000m off the southern and eastern shores of Taiwan. This is a problem for China’s submarine fleet, as the shallow waters make them easy for US satellites and other spyware to spot. If China controlled Taiwan, it would have access to deep-water ports that would allow its rapidly expanding submarine fleet to come and go undetected by Western allies.

The issue of submarine capabilities has been made more urgent by the recent AUKUS security partnership between Australia, the UK and the US to build new submarines to patrol Pacific waters and counter China’s growing naval presence in the region.

Panama Canal

The Panama Canal is facing significant disruptions attributed to climate change, and the repercussions are putting pressure on energy commodity prices. The canal is being squeezed shut by drought, forcing shippers worldwide to face a painful choice: wait or take the long way round.

Low water levels due to the boiling temperatures this year have limited the number of ships passing through the 50-mile (80-km) waterway carrying cars, consumer goods, fruit and fuel. They can pay millions of dollars to jump ahead in the queue, if a ship with a booked reservation drops out.

The long queues building up to pass through the canal have led some companies to send ships round Cape Horn, sailing right around South America, rather than wait in the queue to use the Central American shortcut.

Notably, both oil and liquefied natural gas (LNG) prices are exhibiting downward trends. Brent crude, a key benchmark, has dipped below the $80/barrel threshold, while the TTF front-month is currently trading below €40/MWh, a level not observed in many months.

The unsettling impact on energy markets contradicts the bullish sentiment driven by the ongoing cold spell in Europe. Climate change-induced disruptions at the Panama Canal are contributing to the downward trajectory of oil and LNG prices.

On December 6, the Taiwanese Yang Ming was the latest ship to divert from the congested Panama Canal, and was sent round Cape Horn instead as transit restrictions through the canal continue to increase. The diversion raises the voyage time for its Asia-US East Coast service to 91 days from the usual 84, but given the queue of vessels waiting to pass through the canal, this is still quicker than waiting for canal passage.

And it’s going to get worse as Panama enters its annual dry season, which typically begins in December and lasts until April or May. Gatun Lake, which forms a key stretch of the canal system and provides fresh water for its locks, saw little rain this year as El Nino triggered a withering drought. From January, only five neopanamax boxships will be able to transit the Panama Canal each day, down from eight in December and over 36 that pass through in normal times. The authority has also reduced draft levels – how low a vessel can sit in the water – meaning some ships must carry less cargo.

The authority holds auctions whenever a ship with a reservation cancels, and slots this year have gone for as much as $4mn. A year ago, the average auction price was around $173,000, according to data from Waypoint Port Services, The Japan Times reports. Companies spent $230mn on auctions this year up until November 20.

The US is a major exporter of grain to Asia but low levels of water in the Mississippi River have already prompted some American growers to put their grain on trains to the Pacific Northwest and ship it to Asia from there. Overall US grain exports to Asia have fallen 26% this year compared with 2022, and grain flows through the canal have decreased 37%. It is likely other major grain exporters such as Brazil, Ukraine and Russia may step in to fill the gap for US products in Asia.