Red Sea crisis could reignite inflation – media

Higher freight costs and delays in cargo deliveries amid the Red Sea crisis could drive up global inflation, according to an OilPrice report this week, citing analysts. 

The disruptions to global trade caused by continued Houthi attacks on vessels in the Red Sea have sent shockwaves through global supply chains. Analysts say the repercussions for traffic on the key trade route could continue for months, and ultimately result in a shortage of container ships, which are now using longer routes around the Cape of Good Hope in southern Africa.

“This will strain supply chains and could lead to higher end-product prices, which would fuel inflation just as central banks started to signal rate cuts are in the cards,” OilPrice wrote. Inflation and high interest rates remain a big concern as major economies, which defied predictions of a recession in 2023, could be hit with a downturn this year, experts say.

Central banks could maintain high interest rates for a longer period than currently expected amid the cost-of-living crisis faced by millions of households, according to OilPrice. Europe could be particularly vulnerable to inflation, considering that the Suez Canal is its key maritime trade route from Asia, it noted.

The Yemen-based Houthi rebels have carried out dozens of drone and missile attacks in the Red Sea since the beginning of the Israel-Hamas conflict in October. The militant group has vowed to continue until the hostilities end and the Israeli blockade of Gaza is lifted.

Maritime traffic through the vital sea route, which normally accounts for 15% of global commercial shipping, is down 37% so far in 2024 from a year ago, according to figures from the IMF.

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