Global shipping routes have been significantly altered due to rising security concerns in the Red Sea, reports Bloomberg
According to data from Flexport Inc, around half of the container fleet usually navigating through the Suez Canal has diverted its route.
These vessels, now opting to sail around Africa, have doubled in number compared to the previous week.
18% of world's container capacity
The shift in navigation patterns involves a substantial segment of the global container capacity.
According to the data, the redirected vessels represent around 18% of the world's container capacity, equivalent to 4.3 million containers.
This development underscores the magnitude of the security threats impacting maritime commerce.
Multi-national security effort
Despite the risks, some leading shipping companies, including Maersk, CMA CGM, and COSCO, have partially resumed their operations through the Red Sea.
This resumption follows the initiation of Operation Prosperity Guardian, a US-led multi-national effort designed to safeguard the Red Sea and the Bab el-Mandeb Strait.
The operation aims to mitigate threats from the Iran-aligned Houthi group in Yemen.
Mixed response
However, the response to the security measures has been mixed among shipping giants.
While Maersk has scheduled some of its vessels to continue through the Suez Canal, it has also diverted others via the Cape of Good Hope.
Contrastingly, Germany's Hapag-Lloyd has expressed reservations about the effectiveness of the US military's protective measures and has decided to reroute its ships via the Cape of Good Hope.
This decision adds a significant 3,500 nautical miles to the journey, inevitably increasing shipping costs.
Threat to energy markets
The ongoing conflict in the Middle East and the Houthi missile attacks in the Red Sea pose a broader threat to global energy markets and supply chains.
These developments could potentially lead to higher consumer prices worldwide.
This situation unfolds as the Federal Reserve signals a possible shift in US monetary policy, including the prospect of three interest rate cuts in 2024.