Tensions in the Red Sea spill over into conflict: The US and the UK with support from Australia, Canada, the Netherland, and Bahrain carried out air strikes on Houthi facilities across Yemen on Thursday after repeated attacks by Houthi fighters on commercial vessels crossing the Red Sea in recent weeks, US Centcom said in a statement. Air strikes continued over the weekend as the UN’s special envoy for Yemen called for the “maximum restraint” from all parties while warning of the risks of a regional conflict.

The Houthis have vowed retaliation: Retaliation will be “imminent,” senior Houthi leader Mohammed Ali Al Houthi told tens of thousands of people in the Yemeni capital Sanaa who had gathered to protest the bombing campaign, Bloomberg reported. Western forces can expect a “firm, strong and effective response,” another Houthi spokesperson told Al Jazeera.

Egypt warns of regional escalation: The latest developments are a “clear indication” ofEgypt’s earlier warnings of a spiraling conflict stemming from continued Israeli aggression in Gaza, a Foreign Ministry statement said. The ministry called for regional and international coordination to reduce tension in the Red Sea and instability in the region before fighting escalated even further.

SUEZ CANAL REVENUES PLUMMET-

Suez Canal revenues since the beginning of the year are down 40% y-o-y, Suez CanalAuthority head Osama Rabie told Kol Youm on Thursday (watch, runtime: 24:33). Shipping volumes fell 30% y-o-y during the first 11 days of the year with 544 vessels passing the canal during the period compared to 777 in 2023.

It looks like things are going to get worse before they get better: Efforts to alleviate thesecurity concerns of international shipping companies — like fee reductions and other incentives — have failed, Rabie added. Traffic through the Suez Canal is expected to become even more scarce still after the US and UK militaries advised against all transit through the Red Sea, Reuters reported. If the situation continues to escalate, the Suez Canal could “effectively close for all ships,” Niels Rasmussen, chief shipping analyst at trade group Bimco, told Bloomberg.

Container shipping rates for many key global trade routes have at least doubled from a month ago amid fears of further disruptions in the Red Sea, industry officials told Reuters over the weekend. Moving ships away from the Red Sea and around the Cape of Good Hope adds around 10 days and USD 1 mn in fuel costs to trips between Asia and Europe.

THE OIL MARKET REACTS-

Houthis ‘mistakenly’ target oil tanker: A missile strike launched on Friday narrowly missed aPanama-flagged tanker carrying Russian oil, marking the second time the Houthis mistakenly targeted a tanker carrying Russian oil, maritime security firm Ambrey said. Oil tankers have begun rerouting away from the Red Sea, in the clearest example of disruption to the oil market. At least three firms — Torm, Hafnia, and Stena Bulk, who direct around 350 tankers between them — paused transit through the area, Bloomberg reported.

Remember: Oil tankers have been relatively untouched by Houthis until now, as theHouthis had only attacked non-petroleum vessels. Oil and fuel traffic through the Red Sea managed to hold steady in December.

Market reax: Oil prices climbed 1% on Friday with Brent futures rising as much as 4.3%rightafter the attack, before shedding most of the gains and ending the day up 1.1%.

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