Maersk, the Danish shipping conglomerate, has opted to suspend all maritime activity in the Red Sea and Gulf of Aden indefinitely, following an assault on one of its vessels by militants over the weekend. This strategic decision, extending a 48-hour hiatus initiated immediately after the incident, was communicated to clients in a recent update. The move comes as a response to the attack on the containership Maersk Hangzhou, perpetrated by Houthi militants operating four small boats from Yemen and supported by Iran.
In light of the escalating tensions in the region, Maersk underscored its commitment to ensuring the safety of cargo and crew, emphasizing that a comprehensive evaluation of the evolving situation is imperative. Meanwhile, the global oil market experienced heightened volatility, witnessing an initial surge of over 2% in Red Sea-related concerns. However, these gains were subsequently relinquished, with U.S. crude dropping by 1.14% to $70.83 a barrel and Brent losing 0.88% to trade at $76.36 a barrel.
Despite the precarious conditions, Helima Croft, Head of Global Commodity Strategy at RBC Capital Markets, noted that the current oil prices may not accurately reflect the escalating tensions. Traders seem hesitant, adopting a ‘wait-and-see’ approach, indicating a level of skepticism regarding the potential for a significant disruption in the oil supply. Croft emphasized the seriousness of the situation, asserting that tensions in the region are intensifying daily.
The U.S. Central Command responded to the distress call from the Maersk Hangzhou, dispatching Navy helicopters that engaged with the attacking militants, resulting in the sinking of three boats and the demise of their crews. While an investigation into the incident is ongoing, Maersk emphasized its commitment to pausing all cargo movements in the affected area until a comprehensive assessment is completed. Vessels, where feasible, will be redirected to circumnavigate the Cape of Good Hope in Africa.
The repeated assaults by Houthi militants in the Red Sea have become a cause for concern, particularly amid the ongoing conflict in Gaza. The attacks underscore the potential for disruptions to global trade, given that approximately 12% of global trade and three million barrels of crude oil transit through the Red Sea daily, according to RBC Capital Markets.