Shipping companies are moving to alternatives to the Suez Canal: Maersk, the world’s second-largest container shipping fleet operator and a prominent player in the Egyptian market, has become the latest in a list of shipping companies to say that it is rerouting its vessels away from the Red Sea. Maersk had initially asked its vessels en route to the Red Sea to drop anchor and wait, but has taken more drastic measures in response to repeated attacks on shipping by Houthi armed groups in Yemen.

What’s the alternative? Some vessels will now sail around the Cape of Good Hope rather than use the Suez Canal.

There’s a cost to a longer route: Going around Africa and past the Cape of Good Hope adds over 5k kms to the journey between Asia and Europe, which means an additional USD1 mnin fuel costs, one analyst says — a move which could raise oil price by up to USD 4 a barrel, according to Goldman Sachs.

This could mean a major shake up for the global economy: Inflation will spiral on the back of higher global freight and oil prices and, potentially, kinks in the supply chain. That risks reigniting inflation worries in the US Federal Reserve right after it gave us hope of upcoming rate cuts on the back of cooling inflation.

Re-routing is more drastic than a pause: A number of the world’s largest shipping companies last week said they were pausing Red Sea transit due to the repeated attacks by Houthi groups in Yemen. It’s a strategy that oil giants then followed.

The numbers speak for themselves: The number of ships crossing the Red Sea, en route to and from the Suez Canal, has dipped 36% m-o-m, according to MariTrace data cited by the Financial Times. Last night, there were 210 ships crossing the Red Sea in “one of the biggest changes in international trading routes” since the Russia-Ukraine war. At least 57 container vessels are currently taking the Cape of Good Hope rather than crossing the Suez Canal, transport company Kuehne+Nagel’s Paolo Montrone told CNBC, pointing the combined value being carried by those ships at some USD 35 bn.

Market reaction: The Solactive Global Shipping Index — tracking the value of 47 maritime companies — soared to an all-time high. The index rose 11% over the last week. Both Brent and US crude futures were up overnight.

KSA, UAE disagree over how the US should react, Bloomberg reports, citing people it says are familiar with the matter. Saudi Arabia and the UAE, key players in Yemen’s civil war, back different factions and pursue distinct strategies against the Houthis. While the UAE prefers the US take military action, Riyadh is leaning towards a measured approach, fearing that escalation could endanger a fragile truce and ceasefire negotiations in Yemen.

The Houthis refuse to back down: “Our position will not change in the direction of the Palestinian issue, whether a naval alliance is established or not,” Houthi official Mohammed Abdulsalam told Reuters. His statement comes in response to the recently-announced US-backed maritime task force to ensure vessels passing through the Red Sea are safe from Houthi attacks – dubbed Operation Prosperity Guardian.

Shoukry weighs in: Foreign Minister Sameh Shoukry addressed the issue during a phone call with US State Secretary Antony Blinken, during which he addressed the necessity to ensure safe navigation across the Red Sea so that international trade is not disrupted, according to a Foreign Ministry readout.

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