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Amid attacks on cargo vessels by anti-Israel militants in Yemen, oil giant BP has paused all shipments through the Red Sea, a move that pushed up oil prices Monday and unsettled energy markets.
Iran-aligned Houthi militants began targeting ships along the key route in response to Israel’s war on Hamas, after the Hamas-led attack on Israel on Oct. 7.
BP’s move — along with similar decisions by at least seven shipping companies, including the Taiwanese container shipping line Evergreen and the Belgium-owned tanker fleet Euronav — came as the United States announced it would build a coalition to address Houthi attacks in the Red Sea.
“This is an international problem and deserves an international response,” U.S. Defense Secretary Lloyd Austin said at news conference during a visit to Israel Monday.
The initiative, known as Operation Prosperity Guardian, is to include Britain, Bahrain, Canada, France, Italy, the Netherlands, Norway, Seychelles and Spain. Austin is set to visit Bahrain after Israel.
“The recent escalation in reckless Houthi attacks originating from Yemen threatens the free flow of commerce, endangers innocent mariners, and violates international law,” Austin said in a statement.
Houthi attacks in the Red Sea
from Nov. 19 to Dec. 15
Source: U.S. Department of Defense
Houthi attacks in the Red Sea from Nov. 19 to Dec. 15
Source: U.S. Department of Defense
The announcement by the British company comes as Houthi militants in Yemen target ships operated by a number of companies, prompting several of them to take precautionary measures. But BP is the first major oil firm to halt shipping in the region.
“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,” the company said in a statement. “We will keep this precautionary pause under ongoing review, subject to circumstances as they evolve in the region.”
Two maps show why shipping firms are suspending routes in the Red Sea
Without access to the Red Sea route, and therefore to the Mediterranean via the Suez Canal, many ships will have to circumnavigate Africa to reach their destinations.
“The only alternative route via the Cape of Good Hope would add 14 days to the transit time,” Mirko Woitzik — the head of Everstream Analytics, which specializes in supply chain risk — said in a statement. “This could cause supply shortages for companies and end consumers such as in supermarkets.” According to Everstream, 55 ships have been rerouted via the Cape of Good Hope in southern Africa since Nov. 19, increasing transit times and transportation costs for many shipments.
The price of a barrel of Brent crude was up more than 2 percent after BP’s announcement Monday, trading at around $78. Analysts cautioned that there could be deeper impacts on energy markets if other major oil firms also pause shipping through the Red Sea. Natural gas prices in Europe also rose sharply after BP’s move.
Who are the Houthis and why are they attacking ships in the Red Sea?
Insurance premiums could also surge as a result of continued attacks.
“For most of the world’s vessels, insurance costs for vessels using the Red Sea have doubled,” Woitzik said in the statement. “And costs for Israeli-linked ships have reportedly spiked by 250%, with some insurance companies no longer willing to insure Israeli-linked ships at all.”
Several shipping companies, including MSC, Maersk, CMA CGM, Hapag-Lloyd and Evergreen Group, have said they are avoiding the Suez Canal as militants target vessels. The attacks are sparking concern that supply chains for multiple industries could be disrupted as world leaders deliberate options for protecting shipping routes.
On Friday, Houthi rebels claimed responsibility for attacks on two MSC vessels. “The situation is further deteriorating and concern for safety is increasing,” CMA CGM said in a statement Saturday. “As such we have decided to instruct all CMA CGM container ships in the area that are scheduled to pass through the Red Sea to reach safe areas and pause their journey in safe waters with immediate effect until further notice.”
Evergreen made its announcement Monday morning, citing the “fiercely” escalating “war situation.” It said it was suspending all shipments to and from Israel “until further notice.”