What will be the economic impact of Houthi attacks on Israeli ships in the Red Sea? | Economy

“Before operation”al aqsa floods“There are several assumptions about the safety and security of international trade and its important paths, among which: Red Sea Bab el Mandeb StraitWhere ships transit from Gulf oil states to Europe and Asia.

But in one geopolitical recruiting picture, specifically last November 19, the tables were turned Ansar Allah Group (The Houthis) disproved these assumptions because they targeted more than one vessel with which they were associated IsraelTrying to force it to stop the war in Gaza and allow humanitarian aid to reach the area besieged area.

The Houthis not only seized a ship owned by an Israeli businessman, but also targeted several ships carrying goods and products for Israel, which obviously affected the passage of ships in the area.

Affected by this, many shipping companies announced changes in sailing plans and stayed away from the Bab el-Mandeb Strait near Yemen, and oil prices also began to be affected. Therefore, yesterday Monday, the media was full of reports of rising oil prices as risks threatened the arteries of international crude oil trade.

What impact does the Houthi threat have on international trade?

a report UNCTAD In 2022, “Sea Transport Review” pointed out that global seaborne trade dropped by 3.8% in 2020 due to the impact of the COVID-19 epidemic, but will grow again by 3.2% in 2021, with the total seaborne volume reaching 11% and millions of tons.

Maritime trade growth is expected to be around 2.1% between 2023 and 2027, the report said, but observers said the threat from the Houthis in the Red Sea could negatively impact these expected results.

A quick read on the impact of the Houthi operation may be limited to the proportion of global trade passing through the Bab el-Mandeb Strait, estimated at 10%-12%, but the reality is that the negative impacts are many. BP announced it would stop operating its tankers through the strait.

Additionally, the International Monetary Fund's prediction of a fall in global inflation in 2024 is also questionable, as the organization said inflation will fall to 4.8% after being at 5.9% in 2023.

However, given the impact of the Houthis’ actions in the Red Sea, experts expect transportation costs to increase, as well as insurance costs for goods and ships, which means higher prices for goods and services and a wave of inflation that directly affects global markets .

How severely has trade in the region been affected?

The Houthis' operations in the Red Sea are still in their infancy and they have yet to face a reaction from either side, so the question will depend on the continuation of these operations, especially since the Houthis only target ships heading to Israel and the matter may Expand to other countries supporting Tel Aviv, especially if it comes under external attack.

Recently, they said, the Houthis announced that their operations in the Red Sea were continuing to allow food and medicine to reach the people of Gaza.

But at the level of external or intra-regional trade, the “2022 Arab Unified Economic Report” tells us that the region's total foreign trade is approximately US$2.6 trillion, most of which is controlled by oil.

In general, the foreign trade of Arab countries with ties to Israel (Egypt, Jordan, UAE, Bahrain, Morocco, Sudan) may be affected, in addition, Turkey has a large share of trade relations with Tel Aviv.

What impact will the Houthi offensive have on the Israeli economy?

Of course, the Israeli economy has been most affected, as tankers connected to Tel Aviv have come under attack both on the export and import side.

Given the tourism-related losses to the Israeli economy and the expected decline in growth rates, Houthi operations in the Red Sea have negatively impacted work at Israeli ports, some of which are completely empty of ships.

This reality forces Israel and its dealers to use other transportation methods or sea routes away from the Red Sea, which means an increase in trade costs and is expected to affect Israel's foreign trade in general. The aftermath of Operation “Aqsa Flood” launched by the Palestinian resistance movement.

Observers believe that Israel's foreign trade volume, which will be approximately $180.7 billion in 2022, according to the World Bank, is expected to decline this year, which will increase the economy's trade deficit.

What was the commercial importance of Mandeb Gate and the Red Sea?

The commercial importance of the Bab el-Mandab Strait lies in the fact that it supplements transit routes from… suez canalWithout using the Bab el-Mandeb Strait, the Suez Canal loses the advantages of passing through it, in the form of shorter distances and transit times, thereby reducing fuel and transportation costs.

Perhaps the most important from Asia to Europe through the Bab el-Mandeb Strait is oil and gas, as Gulf oil and gas flows from the Suez Canal and the Bab el-Mandeb Strait to Asia and Europe, and it is known that the Arab countries produce approximately 25% of the world's oil in this region.

Alternative routes to the Red Sea are limited to the Cape of Good Hope, the southernmost tip of the African continent, which requires higher shipping costs due to longer travel times.

How extensive was the damage to the Suez Canal?

The Suez Canal is one of the most important sea lanes in global cross-sea trade, shortening the long distances between Asia and Europe, Africa and Europe, and reducing maritime transportation costs.

Lt. Gen. Osama Rabie, chairman of the Suez Canal Authority, said in a previous statement that ships transiting the canal provided nine days to two weeks for flights between Asia and Europe.

Dr. Hala Al-Saeed, Egypt’s Minister of Planning and Economic Development, said via the ministry’s website when announcing the development plan for 2022-2023 that “about 10% of global trade passes through the Suez Canal. Approximately 25% of total containerized cargo is transported by sea, and almost 100% of total sea container trade is between Asia and Europe.”

However, given that the Houthis target Israeli ships or vessels that deal with Israeli ships in the Red Sea, it is expected to have a negative impact on navigation in the Suez Canal, whose revenue is one of Egypt's most important sources of foreign exchange.