A New Supply-Chain Woe Is Percolating

The editor in chief at shipping journal Lloyd's List on Monday issued a somber prediction to CNBC: that we'd see "fairly seismic activity in terms of the implications for supply chains" if the shipping giants who have recently paused travel through the Red Sea maintain that stance. Then came an announcement from BP that it was joining four of the five world's largest container shipping companies—MSC, Hapag-Lloyd, CMA CGM, and Maersk—in temporarily suspending shipments through the Red Sea "In light of the deteriorating security situation for shipping" there. The moves come on the heels of a series of attacks on vessels by Iran-backed Houthi rebels from Yemen and closes off the route by which ships can reach the Suez Canal from the south.

Per the BBC, the Houthis have been going after ships they believe are headed to Israel and have said they will continue to do so until Israel puts an end to its "aggression" in the Gaza Strip. The AP reports Houthis escalated those attacks last week, "hitting or just missing ships without clear ties" to Israel. CNBC zooms out, reporting the moves close off "access to the key link between Europe and Asia between the Middle East and North Africa." Ships headed from Asia to Europe and vice versa will instead have to travel around Africa's Cape of Good Hope, lengthening the journey and the fuel required to complete it.

Analysts have indicated that if other major oil players do as BP has done, crude prices could be affected. An oil historian and analyst at Eurasia Group echoes that, telling the BBC that "right now it's unclear how significant the impact will be, though if more shipping companies divert their traffic, and if the disruption lasts more than a week or two, prices are likely to climb further." A senior manager for container research at Drewry noted the shipping disruption is exacerbated by the reduction in traffic that has been permitted through the Panama Canal due to low water levels. That said, he told CNBC he didn't expect the disruption to supply chains to hit pandemic-era levels. (More Red Sea stories.)