08 FEBRUARY 2024
The Middle East conflict has escalated in recent weeks with the Houthi rebel group targeting merchant vessels in the Red Sea. The vast majority of all international trade in goods travels by sea with around 15% of that usually passing through the affected region.
The unrest is already having a profound impact on trade with many insurers refusing to cover freight sailing through the Suez Canal, forcing a growing number of ships to opt for a longer, safer alternative route around the Horn of Africa.
This lengthens the typical journey time by several weeks and significantly increases travel costs. The chart below shows how the cost of transporting a single container from China to Northern Europe has spiked by almost 6-fold since the Israel/Hamas war began in early October.
This risks triggering another wave of imported goods inflation in the UK and Europe, although the disruption and associated cost increases are a fraction of what we saw during the pandemic.
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