Starting the new year with a clean slate has not been possible: The world is still facing geopolitical pressure that could lead to new and larger conflicts.
The events in the Red Sea are particularly significant in this regard. It seemed that the situation would improve with the formation of a naval force to protect ships in the area, but it did not. Houthi ballistic-missile attacks on ships in the Red Sea continue, disrupting the safe passage of cargo through Bab-el-Mandeb strait and the Suez Canal.
As a result, shipping companies are being forced, for the sake of protecting their workers and cargo, to find alternative routes, which, unsurprisingly, leads to increased time and costs.
The consequences are already evident: Freightos, a booking and payments platform for international freight, says rates from Asia to Northern Europe have more than doubled to more than US$4,000 per 40-foot container, and prices from Asia to the Mediterranean rose to $5,175.
Rates for shipments from Asia to the east coast of North America rose 55% to $3,900 per 40-foot container. Rates to the west coast rose 63% to more than $2,700.
This is not because companies decided to take advantage of the situation and raise prices arbitrarily but because diverting ships through the southern tip of Africa would cost up to $1 million more in fuel.
But there is also good news: Rates are still well below the pandemic-driven 2021 record highs of $14,000 per 40-foot container from Asia to Northern Europe and the Mediterranean.
Of course, this does not mean that the threat of a spike in inflation is not a concern, but at least there is hope that the price growth will not be as severe.
But what if the situation in the region worsens further?
Let us start with the fact that the likelihood of such a scenario remains low for now, at least judging by Iran’s unwillingness to engage in direct confrontation with the US and Israel.
However, if Houthi attacks and piracy in the Red Sea continue, it is quite likely that logistics prices will rise further, disrupting central banks’ plans.
To be more precise, regulators will most likely be forced to postpone a change in monetary policy, thus putting pressure on the global economy and worsening market sentiment.
Who stands to benefit from all this chaos?
First, the shipping companies, whose stocks have already been on the rise. Second, delays in maritime transport could lead to a volume shift toward sea-air services or airfreight alternatives.
In addition, oil and gold prices could rise, on the one hand, due to increased uncertainty and, on the other hand, due to supply bottlenecks and, of course, higher transport costs.