By Stanley Reed
Global oil prices jumped earlier this week after energy giant BP said it had stopped sending tankers through the Red Sea, a vital shipping lane that has become an increasingly dangerous route because of drone and missile attacks targeting merchant ships launched by the Houthi armed group in Yemen.
The announcement by BP raised fears of further disruption to shipments through the Suez Canal, a major conduit for both crude and refined oil products.
In response to the growing concerns of disruption, Defense Secretary Lloyd Austin announced Monday night that at least nine other nations had agreed to join the United States in a joint security operation in the Red Sea, where some of those countries’ navies have already foiled drone attacks by the Houthis, who control much of northern Yemen.
The recent escalation of attacks “threatens the free flow of commerce, endangers innocent mariners, and violates international law,” Austin said in a statement. The nations joining the operation include Britain, France, Canada, Italy, Norway and Spain, he said.
The Houthis have been staging assaults against ships in the region since the Oct. 7 Hamas-led attacks on Israel. They have threatened all vessels owned and operated by Israel, as well as any ship heading for Israeli ports. Both the Houthis and Hamas, which controls the Gaza Strip, are backed by Iran.
“BP has decided to temporarily pause all transits through the Red Sea,” BP said in a statement on Monday that referred to “the deteriorating security situation for shipping.”
Over the weekend, military forces of the United States and other countries said they had shot down more than a dozen drones in the area. On Monday in Tel Aviv, Israel, before the task force announcement, Austin warned that “Iran’s support for Houthi attacks on commercial vessels must stop.”
Soon after Austin’s remarks, Mohammed Ali al-Houthi, a senior member of the Houthis, defended the attacks on social media as an effort to force Israel to halt its military assault on Gaza. The United States has “no right to speak about international law, which your airstrikes and rockets have torn up and buried under the ruins of Gaza and Yemen,” al-Houthi said.
Brent crude, the international oil benchmark, rose more than 2% in trading Monday, approaching $80 a barrel. Oil prices had been under downward pressure because of higher production, especially from the United States, and signs that broad economic weakness would restrain demand. Last month, the producers group known as OPEC+ announced output cuts to steady the market, but there was little response in global oil markets until recently.
Shortly after the Oct. 7 Hamas attacks, Chevron halted production at a natural gas platform in Israeli waters offshore from the Gaza Strip but was able to restart it a few weeks later. Disruption to shipping through the Suez Canal could have more of an impact on the global economy.
As the Red Sea has become a flashpoint, major shipping companies — including Evergreen, Hapag-Lloyd, Maersk and Mediterranean Shipping — have in recent days said they would temporarily stop sending vessels through the area.
A key risk is that if the attacks on shipping persist, oil companies and other shippers may stop using the Suez Canal for an extended period. Such a change could disrupt the flow of oil from countries such as Saudi Arabia and Iraq, where BP operates a major oil field, to Europe and elsewhere.
Tankers on their way from the Persian Gulf region regularly travel through the Red Sea to reach the Suez Canal, which serves as a conduit to the Mediterranean Sea. Ships from Saudi Arabia also unload crude into a pipeline called the SUMED that runs from Ain Sokhna, a port and storage area south of Suez, to a terminal near the Egyptian city of Alexandria.
Viktor Katona, an analyst at Kpler, a firm which tracks commodity shipping, said that the volume of oil and oil products flowing through the Suez Canal had already dropped sharply this month, to about one-third of the usual flows. About 12% of crude oil and refined products traded by sea typically travel through the canal, Katona estimated.
If a slowdown continues, he said, tankers will need to take the far longer route around the Cape of Good Hope in Africa. In that case, not only would tankers burn more fuel in transit but freight rates and insurance premiums would most likely rise, increasing costs for consumers.
“It’s a pressure piling up in the system,” he said