Red Sea crisis escalation: US-UK airstrikes, Houthis’ vessel attacks, spike in oil prices, and tanker trade slowdown

Recent events in the Red Sea have added fuel to the growing fears about the possibility of a wider conflict breaking out across the Middle East, prompting further concerns over oil flows, supply chains, and energy prices in the region and beyond. Following Iran’s hijacking of a crude oil tanker and the airstrikes the U.S. and the UK carried out against the Houthi sites in Yemen in response to recent vessel attacks, analysts have warned about the impact of these events on the global economy’s ability to tackle inflation.

Previously, the oil tanker owners kept using their charted Red Sea routes even in the wake of the Houthis’ initial barrage of vessel attacks. However, Iran’s recent seizure of a tanker carrying Iraqi crude oil and the airstrikes, which the U.S. and the UK decided to undertake against Houthis’ positions in Yemen have changed things. More and more vessels are now diverting around the Cape of Good Hope on the southern tip of Africa, which increases the ships’ voyages and delays deliveries to Europe.

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The security woes in one of the most heavily traveled waterways in the world have led to a drop in tanker transits, as these vessels are now diverting from these trade lanes alongside container ships. Since this development also pushes shipping costs up, further disruption to maritime trade activities along with elevated oil prices, is a combination that has the potential to undermine efforts to combat inflation and bring it down from the highs spurred by the COVID-19 pandemic and the energy crisis.

The severity of the security situation in the Red Sea is encapsulated in a warning that recently came from the International Association of Independent Tanker Owners (Intertanko) – representing close to 70% of the world’s oil, gas, and chemical tankers – which decided to advise its members for the first time to avoid Yemen. Sweden’s Stena Bulk, Singapore’s Hafnia, and Denmark’s Torm seem to have made up their minds to avoid the Red Sea.

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These maritime players are joining the growing list of shipping industry giants that took steps to suspend trading on their Red Sea trade routes, which includes but is not limited to Denmark’s A.P Moller-Maersk, the Italian-Swiss Mediterranean Shipping Company (MSC), France’s CMA CGM, Germany’s Hapag-Lloyd, and Hong Kong’s Orient Overseas Container Line (OOCL).

Many of these companies, like Maersk, felt hope after the deployment of Operation Prosperity Guardian (OPG), a multi-national security initiative established to respond to Houthi-led attacks on shipping in the Red Sea. In the aftermath of an attack by four Houthi small boats, which opened fire at the Maersk Hangzhou container vessel and attempted to board it, the initial hope has been replaced with additional safety worries.

These Red Sea attacks are happening against the backdrop of the Israel-Gaza crisis, which shows no signs of stopping despite the death toll reaching a staggering 23,843 with over 60,317 wounded since October 7, 2023, according to Al Jazeera. Usually, the Red Sea is home to around 15% of maritime traffic between Europe and Asia with its connection to the Mediterranean Sea via the Suez Canal.

After it became a hotspot for maritime incidents, the data from the IfW Kiel Institute, Germany’s economic institute, revealed that the global trade using the Red Sea route declined by 1.3% from November to December 2023, as a direct consequence of the Houthis’ so-called maritime retaliation tactics against global shipping companies with ties to Israel.

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While the attacks have certainly been affecting vessels heading to and from the Suez Canal with no such ties as well, the Houthi activity has mostly focused on the narrow strait of Bab al-Mandab, connecting the Gulf of Aden to the Red Sea.

Furthermore, Financial Times reported on Friday, January 12, that the diversion of container vessels led Tesla to pause operations at its electric car manufacturing plant in Germany due to delays in receiving parts, which means that Europe’s supply chain industry is already experiencing the effects of the Red Sea crisis.

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As a result, manufacturers have turned to air freight for critical parts. Following media speculation and reports about the suspension of traffic through the Red Sea, Osama Rabie, Head of the Suez Canal Authority, highlighted that the traffic was regular in both directions.

Rabie claims that there is no truth to what is being said in shipping circles about temporarily suspending navigation as a result of developments in the Bab al-Mandab region. The Suez Canal was expected to witness the crossing of 44 ships from both directions on January 13, with a total net tonnage of 2.3 million tons.

Rabie emphasized the Suez Canal Authority’s “keenness to open direct channels of communication” with companies and shipping lines and joint coordination in the interest of serving the shipping community and ensuring the sustainability of global supply chains.

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This came after 27 separate attacks against merchant shipping in the Southern Red Sea and Gulf of Aden, multiple warnings, and a UN Security Council Resolution, led a coalition consisting of the U.S., the UK, Bahrain, Australia, Canada, and the Netherlands to target multiple Houthi sites in Yemen. At the time, the Combined Maritime Forces (CMF) advised ships to avoid transiting the Bab al-Mendab for several days and stay above 18N and east of 46E.

The UKMTO notes that if a ship is passing through the Red Sea area without AIS on, this may delay their ability to send see-and-avoid notices directly to the ship, thus, increasing the frequency of position reports to UKMTO is recommended if the AIS is turned off. With the vast majority of attacks occurring during the day, a night transit and the risk of collision also need to be considered.

The U.S. Central Command (CENTCOM) confirms that on January 13, U.S. forces conducted a strike against a Houthi radar site in Yemen with the USS Carney (DDG 64), an Arleigh Burke-class guided-missile destroyer, using Tomahawk Land Attack Missiles. This is said to be a follow-on action on “a specific military target” connected with strikes taken on January 12. CENTCOM informed that these airstrikes were designed to “degrade the Houthi’s ability to attack maritime vessels, including commercial vessels.”

“Since Nov. 19, 2023, Iranian-backed Houthi militants have attempted to attack and harass vessels in the Red Sea and the Gulf of Aden 28 times. These illegal incidents include attacks that have employed anti-ship ballistic missiles, unmanned aerial vehicles, and cruise missiles. These strikes have no association with and are separate from Operation Prosperity Guardian, a defensive coalition of over 20 countries operating in the Red Sea, Bab al-Mandeb Strait, and Gulf of Aden,” outlined the U.S. Central Command.

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During the 27th attack on commercial shipping lanes in the Gulf of Aden, which took place on January 11, the Houthis fired an anti-ship ballistic missile from their areas in Yemen into international shipping lanes in the Gulf of Aden, based on CENTCOM’s report. On the same date, the U.S. Central Command forces, in coordination with the United Kingdom, and with support from Australia, Canada, the Netherlands, and Bahrain conducted joint strikes on Houthi radar systems, air defense systems, and storage and launch sites for one-way attack unmanned aerial systems, cruise missiles, and ballistic missiles.

Michael Erik Kurilla, USCENTCOM Commander, commented: “We hold the Houthi militants and their destabilizing Iranian sponsors responsible for the illegal, indiscriminate, and reckless attacks on international shipping that have impacted 55 nations so far, including endangering the lives of hundreds of mariners, including the United States. Their illegal and dangerous actions will not be tolerated, and they will be held accountable.”

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After the strikes against several targets in Yemen, Joe Biden, U.S. President, said: “These strikes are in direct response to unprecedented Houthi attacks against international maritime vessels in the Red Sea—including the use of anti-ship ballistic missiles for the first time in history. These attacks have endangered U.S. personnel, civilian mariners, and our partners, jeopardized trade, and threatened freedom of navigation. More than 50 nations have been affected in 27 attacks on international commercial shipping.

“Crews from more than 20 countries have been threatened or taken hostage in acts of piracy.  More than 2,000 ships have been forced to divert thousands of miles to avoid the Red Sea—which can cause weeks of delays in product shipping times. And on January 9, Houthis launched their largest attack to date—directly targeting American ships.”

In a joint statement, the governments of Australia, Bahrain, Canada, Denmark, Germany, Netherlands, New Zealand, the Republic of Korea, the United Kingdom, and the United States hammered home that the joint strikes were done in accordance with “the inherent right of individual and collective self-defense, consistent with the UN Charter,” against several targets in Houthi-controlled areas of Yemen.

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“Today’s action demonstrated a shared commitment to freedom of navigation, international commerce, and defending the lives of mariners from illegal and unjustifiable attacks. Our aim remains to de-escalate tensions and restore stability in the Red Sea, but let our message be clear: we will not hesitate to defend lives and protect the free flow of commerce in one of the world’s most critical waterways in the face of continued threats,” underscored the governments’ joint statement.

These strikes came days after 14 countries, including the U.S, issued a joint statement on January 3, stating: “The Houthis will bear the responsibility for the consequences should they continue to threaten lives, the global economy, or the free flow of commerce in the region’s critical waterways.”

Once the airstrikes were carried out, VADM Brad Cooper, 5th Fleet commander, remarked: “I couldn’t be prouder of the sailors deployed to U.S. 5th Fleet. The crews on every ship, submarine & squadron are doing great work in a tough environment. Houthi aggression is a threat to all legitimate maritime traffic and must cease.”

The range of reactions to the strikes encompass expected anger from Russia and Iran, support from U.S. allies, but also criticism from progressive Democrats as these actions were taken without approval in the U.S. Congress. The pressure on the U.S. to respond to the rising Houthi attacks was certainly growing ever stronger at the time these airstrikes were conducted. Florida Politics reports that Ron DeSantis, GOP Presidential Candidate and current Florida Governor, underlined that Biden had not violated the constitution by bypassing Congress when taking action against the Houthis.

One of the negative reactions to the airstrikes on the Houthis’ sites in Yemen came from the former U.S. President, Donald Trump, who wrote in a Truth Social post: “So, let me get this straight. We’re dropping bombs all over the Middle East, AGAIN (where I defeated ISIS!), and our Secretary of Defence, who just went missing for five days, is running the war from his laptop in a hospital room. Remember, this is the same gang that ‘surrendered’ in Afghanistan, where no one was held accountable or FIRED. It was the most embarrassing ‘moment’ in the history of the United States. Now we have wars in Ukraine, Israel, and Yemen, but no ‘war’ on our Southern Border. Oh, that makes a lot of sense. Crooked Joe Biden is the worst President in the history of the United States!”

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A significant number of critics, who consider themselves to be well versed in Trump’s foreign policy during his term in the White House, have been quick to point out that Trump almost started a full-blown war with Iran, thus, they find his concerns about dropping bombs again over the Middle East ludicrous and downright hypocritical. In contrast to Trump’s views, Avi Melamed, former Israeli Intelligence Official and regional analyst, believes the attack on the Houthis upturns Tehran’s plans, challenging the Iranian regime’s alleged hegemonic aspirations and long-term assumptions that have driven its strategies and tactics.

Melamed shared: “Iran’s hegemonic vision and its use of proxies throughout the region was based on the assumption that the United States and its allies would not use proactive force to deter Iran or its proxies. Last night’s proved otherwise sending a strong message not only to Tehran – but all of its partners as well – that the U.S. is resolved to proactively attack those that actively challenge its interests. Within the context of how Tehran is pulling the strings surrounding the war in Gaza- the Houthis are an integral, if not the most integral, component of the Iranian tactic to use its proxies to manipulate the U.S. to pressure Israel to halt its progress in Gaza.

“The last three months have clearly shown that Hezbollah – Iran’s largest proxy – is not interested in engaging Israel in a full-scale war at this time and the Iraqi militias are limited in what they can effectuate against Israel or the U.S. While until last night the major question reverberating throughout the region was focused on whether the U.S. would meaningfully defend its interests, today that question focuses on Tehran- will Tehran escalate and order its proxies to ramp up their efforts against Israel and the U.S., or will it protect those proxies by de-escalating at the cost of Hamas and PIJ in Gaza?”

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While listing some of the recent attacks that prompted the airstrikes against the Houthi areas in Yemen, Biden wrote in a letter to the Speaker of the House and President pro tempore of the Senate – consistent with the War Powers Resolution – that the series of attacks against United States military forces operating in the Red Sea, the Bab al-Mandeb Strait, and the Gulf of Aden pose “a threat to the safety of United States forces and commercial ships and their crews, regional political and economic stability, and navigational rights and freedoms.”

Biden further added: “I directed this military action consistent with my responsibility to protect United States citizens both at home and abroad and in furtherance of United States national security and foreign policy interests, pursuant to my constitutional authority as Commander in Chief and Chief Executive and to conduct United States foreign relations. The United States took this necessary and proportionate action consistent with international law and in the exercise of the United States’ inherent right of self-defense as reflected in Article 51 of the United Nations Charter. The United States stands ready to take further action, as necessary and appropriate, to address further threats or attacks.”

Many experts have warned about the potential consequences of ongoing attacks on vessels in the Red Sea that could have devastating effects on the global economy, which is still recovering from the COVID-19 and energy crisis woes. In response to the market turmoil and investors’ fears about further disruptions and supply cost hikes, Brent crude rose 1.8% to $77.95 a barrel and U.S. West Texas Intermediate crude price jumped 1.5% to $72.47 on December 18.

After new developments came to light, oil prices jumped around $2 after the attack on Maersk’s vessel and the appearance of an Iranian warship on the scene. Once the dust settled, oil prices dropped, with Brent crude falling to $75.88 a barrel and U.S. West Texas Intermediate crude futures decreasing to $70.3 a barrel in early January 2024. Traders were anticipating a stable oil supply during the first half of 2024 at the time, keeping a lid on prices ahead of the upcoming OPEC+ meeting that Reuters reported would be next month.

Thanks to the airstrikes along with the drop-off in tanker traffic through the Red Sea, the plot now thickens further, as oil prices surpassed $80 a barrel for the first time in 2024 on January 12, but ended at $78.29 a barrel while the U.S. West Texas Intermediate crude futures settled at $72.68. Despite the longer shipping routes and higher costs, oil supplies have not been endangered so far, keeping the Red Sea crisis’ impact on oil markets to a minimum for the most part.

On the other hand, analysts are concerned that if the situation escalates further across the Middle East, the current transportation issues that are affecting some crude supplies could turn into wider oil supply issues as well. Such a scenario would disrupt oil supplies while diverting tanker traffic around South Africa would continue to ramp up freight rates due to longer routes. This in turn will have the potential to hit the global economy hard just as nations around the globe are trying to push inflation down.

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Moreover, Reuters reported on January 12 that the Houthis had mistakenly targeted a tanker carrying Russian oil in a missile attack off Yemen. Even though the Houthis claim their attacks are a show of support for Palestinians suffering in the Israel-Gaza conflict, it is difficult to see how these vessel attacks help the Palestinian cause or the resolution of the decades-old conflict between Israel and Palestine, which certainly does require swift action to stop further bloodshed between the two sides.

Antony Blinken, U.S. Secretary of State, recently warned of higher costs translating into elevated global prices for fuel, medicine, and food while Biden told reporters that he was “very concerned” about the impact of the strikes in Yemen on oil prices. This indicates that aside from putting an end to further human suffering, the Red Sea crisis’ impact on oil markets is among the driving forces behind the need to stop the conflict from spreading across the region.

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Will the hopes of coming to grips with inflation go up in flames, if rising prices on several fronts take another bite out of the global economy? Are regional and global oil and gas flows in danger? What will happen to the Red Sea transit and will it grind to a halt if the security situation is not brought under control soon?

All these questions and many more continue to plague the world together with rising geopolitical tensions and the erosion of safety and security around the globe, as multiple conflicts continue to rage unabated.

Swift global action is a must to de-escalate the situation and usher in peace across the Middle East with a two-state solution for the Israel-Gaza crisis, finally creating a long overdue safe place for people caught in the crosshairs on both sides of the conflict.

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