The future of the conflict between Israel and the Palestinians is of central importance to the short-term prospects of the sea and air freight markets. If the present ceasefire agreement being implemented persuades the Houthi movement and its Iranian backers to stop attacking shipping in the Red Sea it will have strong effect on freight markets.
There are signs that the group is considering ceasing attacks. A spokesman from the organisation told the Qatar based news organisation Al Jazeera that “If Israel stops the aggression in Gaza, and if the US, UK and Israel stop the aggression against Yemen, the Houthis will stop their operations, including attacks against navies and commercial ships”.
In an email sent to a variety of media and industry sources on Sunday, the Houthi’s made a further statement asserting that they would cease attacks on shipping by Sunday 19th January, however attacks on wholly-owned Israeli vessels would continue. Rather, British or American owned ships, vessels partly owned by Israeli companies and other nationalities would not be attacked.
However, the organisation also stated that if there was further conflict between Israel and the Palestinians, they may resume attacks on shipping. It should also be noted that the Houthis fired two missiles at Israel over the weekend. Bearing in-mind, whilst Israel and Hamas have exchanged hostages and prisoners, the relationship is hardly a peaceful one. The possibility of further violence must be high. Therefore, the probability of the Houthi’s returning to attacks on shipping may also be high. In addition, the position of the Houthi’s supplier of weapons, Iran, is also unpredictable.
The container shipping lines face a difficult problem. Some smaller container lines are clearly willing to take the risk of resuming services through the Suez Canal. There are also suggestions that certain lines have been paying-off the Houthis. The larger container lines are generally more cautious, although some are more cautious than others. However, once container lines of any size resume using the Suez route their competitors will be forced to do likewise or face a competitive disadvantage. The issue of insurance will be key in these decisions.
If there is less violence in Gaza, if Iran feels it is desirable to stop supplying missiles and the Suez route becomes usable again, then the container shipping market will experience a sharp correction. The resultant increase in supply of container carrying capacity of more than 20% will inevitably drive-down freight rates. It is also likely to affect airfreight as well. Yet the uncertainty will still remain.
Author: Thomas Cullen
Source: Ti
