Global shipping threatened by Houthi military advances

Vashala Stripathma (0:00)

Another key shipping route is under threat, and oil prices are feeling it.

Peter Sand (0:06)

It means that a bad day just got worse.

Michelle Weiss-Blochman (0:09)

There are fewer ships that are prepared to go into these high-risk areas to load cargoes.

Vashala Stripathma (0:14)

It's World Business Report from the BBC World Service.

I'm Vashala Stripathma. On the way, the Houthis have expanded their control in the Red Sea, unsettling one of the world's busiest trade routes. Inflation in the US refuses to budge, but we'll meet a Boston business owner who's defying the trend. And a quarter of a century after 9-11, we ask how Wall Street was changed forever.

So we begin in Yemen, where the Iran-backed Houthis have tightened their grip on the country's Red Sea coast. Now, they control the Bab al-Mandab Strait, a narrow stretch of water that sits at the entrance to the Red Sea and carries a huge amount of global trade. If you're shipping goods between Europe and Asia, this is one of the most important routes in the world. So what happens when that route comes under threat? Well, Peter Sand is chief analyst at freight intelligence company Zanata.

Peter Sand (1:19)

It means that the bad day just got worse since the late 2023

The Houthis have basically scared away half of international maritime activity through that area.

And the most recent flare up with the fighting against the Saudis is just making this area even more dangerous than it already was.

Vashala Stripathma (1:43)

What does that mean for shipping routes? So if you are expecting cargo that's coming through that route, we've heard from the Houthis that have said that it's not going to affect shipping. But do we know that to be true?

Peter Sand (1:56)

I wouldn't at least assess my risk assessment on the basis of communication from any parties involving in war, being the Houthis, the Saudis, the Iranians or the Americans. So what this means for cargo owners is that if you were having cargo on board your container ship, that you expected to go through that area. Some still do, even though the majority go around the Cape of Good Hope. You may all of a sudden find that cargo to go around the Cape of Good Hope and at some 10 to 14 days of transit time. So goods critical maybe to your supply chain, your assembly line, your manufacturing could be well, waiting for you.

Vashala Stripathma (2:39)

What are businesses doing? What kind of decisions are they having to make because of what's going on with the Houthis and the Red Sea and that quite crucial port of Mokka?

Peter Sand (2:50)

I think you need to see this not in isolation, but in context with the wider Middle East situation right now. So one nation being particularly hit from the closed Strait of Hormuz, when it comes to imports of containerized goods, as well as exports of crude oil and liquefied natural baths to some extent, is the Saudi Arabia.

So the fact that the Houthis may now stop shipping to go in and out of Red Sea to call the port of Jeddah, or Yanbu, for that matter, is really a curve ball on the Saudis. So obviously, they cannot accept a closure of Bab al-Mandab because that will cut off a clear, say, artery for goods flowing in and out of Saudi Arabia that is now even more important than it was before with the closure of Hormuz.

Vashala Stripathma (3:49)

So that was Peter Sand, Chief Analyst at Freight Intelligence Company, Zanetta, explaining what's going on with shipping. Well, the military threat of the Houthis means that the safety for ships and crews will be a key issue for the industry. Michelle Weiss-Blochman is a Maritime Intelligence Analyst with Windward.

Michelle Weiss-Blochman (4:07)

Well, the Houthis have really had an outsized influence on this global shipping choke point since 2023

And now, obviously, with the additional threat to the Saudi oil at a time when the Strait of Hormuz is also partially closed, this really does raise risk and make getting oil to key markets much more difficult. Saudi oil that is going to either China or to Pakistan has really got a free pass from the Houthis, and it has been allowed to go through Bab al-Mandab uninterrupted, as well as Russian oil that's been going from the Baltic and the Black Seas to India and China. So the targeting is quite specific. But what we have learnt from the past years is that Houthis messaging to the world is inconsistent and inaccurate and very mercurial. So even when a vessel from the same fleet has previously called Israel, for example, they're still viewed as a Houthi target. So there is considerable risk for many ships to be going through into the Red Sea.