Shell Suspends Shipments Through the Red Sea

Shell joins Qatar Energy and BP in suspending shipments through the Red Sea indefinitely amid fears of conflict escalation between Houthis and the United States and the United Kingdom. More oil majors are expected to join Shell as potential oil spills represent a major risk for the companies, threatening the safety of the crews.

In December, the Houthis launched attacks on vessels crossing the Red Sea. Many companies have stopped crossings through this route, affecting global commerce due to its logistical importance in trade. According to Reuters, the Houthis are acting in solidarity with Palestinians. More than US$280 billion in goods have been diverted; lengthy routes around South Africa's Cape of Good Hope are driving up mileage and shipping costs, reports LinkedIn News. As shipping companies turn to the Cape of Good Hope as an alternative route, port congestion is starting, resulting in significant delays.

The Red Sea, a vital maritime route connecting the Mediterranean Sea to the Indian Ocean through the Suez Canal, has become a red zone for shipping companies due to recent missile attacks on vessels. This critical waterway is a linchpin for global trade, with the Suez Canal alone accounting for 12% of the world's maritime trade. The US advised commercial ships to avoid the Red Sea. BP also halted crossings through this route, “in light of the deteriorating security situation, reports Oil Price.

The US and the UK have turned the conflict global as they retaliated against Houthis’ attacks. While the conflict playing out in the Middle East has not been considered to generate a major impact on prices, experts warn to keep a close eye on the conflict. Houthis’ attack in the Red Sea and US-UK strikes in Yemen affected Brent oil, elevating it above US$80 only briefly, later moving back to US$78.

The conflict has the potential to increase Europe’s energy prices and increase inflation which would also lead central banks to continue with high interest rates. It could also affect 40% of Asia-Europe trade.

Analysts also expressed concern regarding Russia’s shadow oil fleet. “Most tankers are old and under or not at all insured. If we experience an oil spill out of those old tankers, it will be practically impossible to receive any compensation,” writes Andrea Lis, Senior Global Corporate Executive, MSK Instruments.

Mexico Calls Out for Parties in the Conflict to Abide by International Law

Mexico called for military action in the Red Sea to adhere to international law. “[Mexico] observes with concern the increase in military operations in the Red Sea, due to the risk that the escalation of hostilities in the region entails for international peace and security. We call for dialogue and for any military action to adhere to international law,” wrote the Ministry of Foreign Affairs.