AN UPDATE ON THE ISRAELI-HAMAS CONFLICT AND RED SEA CRISIS: WHAT IT MEANS FOR SHIPPING

09/07/2024 - hoàng anh - 2 Comment

1. The world is watching closely as a possible ceasefire nears agreement between Israel and Hamas in the long-running conflict that began on October 7th, 2023

Israel has sent a delegation to negotiate the terms of a ceasefire that could last as long as six weeks and turn into a permanent ceasefire. Decisions will be made in the coming days. Hamas has already accepted the framework of the deal, and Israel has signaled it is willing to do the same. Needless to say, the entire shipping and logistics industry is watching the news wondering: what’s next and how will it affect the global supply chain?

 

2. The Israeli-Hamas conflict may see the first ceasefire in months. That’s good news for shipping

The shipping industry has been plagued by a series of major issues over the past three years since the Covid pandemic. However, just when major issues were resolved (or at least appeared to be), the war between Israel and Hamas flared up last fall with Hamas’ attack. What resulted for the shipping industry was a mix of factors that drove up volatility and costs for shippers.

With a ceasefire looking increasingly likely, the first effect on shipping would be reduced supply chain volatility. In general, any political or military conflict has raised volatility in the industry and this war really drove up uncertainty in the Middle East with the Red Sea Crisis, as well as general uncertainty about if other shipping routes would be affected.

 

3. It’s been over a week since the last attack on a vessel in the Red Sea. Could that be a sign of things to come?

The Red Sea Crisis started soon after the October 7th attacks when Houthi rebels, affiliated with Iran and acting as proxies of Hamas, began attacking commercial vessels using the Red Sea for shipping transits, and other activities.

Week after week, for months, there were many attacks against shipping vessels. Due to this, many vessels started using the Cape of Good Hope route, which routes ships around Africa, rather than the much easier Suez Canal route.

Now, the attacks appear to be slowing. It’s over a week since the last attack on a vessel. Shippers are now watching with hope to see if this is the start of a calmer era. Obviously, the ceasefire will have to be implemented and followed up upon by both parties. But, if the ceasefire causes the Red Sea Crisis to come to an end, it will mean cheaper shipping again, quicker shipping routes, more scheduling reliability, less volatility, and everything positive for shipping. Although shippers have gotten used to the new route, they await it’s end for the reasons above. If the Red Sea Crisis truly ends, ships will resume the Red Sea-Suez Canal route.

The next few days and weeks will mark an inflection point for shipping: does volatility die down and more stability come into the picture? Or do things remain muddled with uncertainty, as they have for months? Time will tell.

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