Shifting Tides: Geopolitical Events and the Shipping Industry

A number of volatile geopolitical events, marked by the Houthi rebels' attacks on commercial ships in the Red Sea, and simultaneous crises in major shipping canals, have triggered a ripple effect across the global shipping industry.

The attacks by Houthi rebels in Yemen have forced major shipping companies to alter their routes, avoiding the Red Sea and opting for longer, costlier journeys around the Cape of Good Hope.

Source: Financial Times
This redirection away from the Suez Canal, which is responsible for around 15% of global trade, has led to a spike in freight rates. Container shipping rates on key global routes have, on average, doubled over the past month. The disruptions have also prompted a number of companies such as BP and Shell to pause shipping via the affected routes, underscoring a broader impact on global commerce.

The escalating situation has led to serious concerns about the safety of maritime routes, with traffic along the Suez Canal down by 28% in early January, according to the IMF PortWatch. At the same time, climate-related issues, such as drought affecting the...