The Red Sea crisis may push up inflation in Europe and affect energy supply
In recent days, the United States and the United Kingdom have launched multiple rounds of air strikes against Houthi armed targets in Yemen, exacerbating regional tensions and severely affecting global shipping.
Analysis by multiple institutions pointed out that a large amount of energy supply and trade transportation between Europe, the United States and the Middle East pass through the waters of the Red Sea. The continued obstruction of this maritime chokepoint may once again push up the level of inflation, and European energy supply will also face impacts.
According to ING statistics, after mid-December last year, about 80% of container ships on the Red Sea-Suez Canal route were forced to change routes, and by early January this year, the figure reached 90%.
Statistics show that about 30% of global consumer goods trade is transported through the Suez Canal. Shipping delays and continued increases in freight costs have led to an increase in container freight rates, which will also lead to a certain increase in the price of all goods in the container. A research report released by Oxford Economics in the UK in January this year believed that there are upward risks to global prices. The report said that if container shipping costs remain at current levels, it could increase global inflation by about 0.6 percentage points. According to US media reports, before the surge in shipping prices had time to affect consumer prices, the inflation rate in the United States and Europe had already increased in December last year. European economists warned that rebounding inflation and intensifying “upside risks” mean that the European economy still faces uncertainty.
The Red Sea-Suez Canal route is an important waterway for the transportation of oil and its derivatives from the Persian Gulf to Europe and the United States. According to data from market research firm Kepler, 25 LNG carriers have diverted from the Red Sea to Africa’s Cape of Good Hope since December 15 last year. In addition, data shows that shipments of Middle Eastern crude oil to Europe are declining. Exports in December 2023 will be approximately 570,000 barrels per day, almost halved from 1.07 million barrels per day in October 2023, which will have an impact on European energy supply.