The UK Maritime Trade Operations (UKMTO) reported two maritime incidents involving commercial vessels last Sunday. The first occurred in the Red Sea, where a suicide drone attacked a vessel. The second incident occurred in the Gulf of Aden.
The latest update from UKMTO said a commercial vessel "reported uncontrollable severe flooding, forcing the master and crew to abandon ship" 96 nautical miles southeast of Nishtun, Yemen. The crew has been rescued by an "assisting vessel" and the abandoned ship is still drifting.
Attacks by the Iran-backed Houthi rebels in the Red Sea and Gulf of Aden continued to escalate, with two more incidents reported in less than 12 hours as of Sunday morning (as of 8 a.m. ET). At this time, the United States has sent the USS Eisenhower home after an eight-month deployment.
In the oil market, traders are ignoring the risk of a wider conflict in the Middle East, even though the Gaza war could soon spread to Lebanon. If the situation escalates further, then expect more drone and missile attacks on merchant ships passing through key maritime choke points in the Middle East, where trillions of dollars in global trade flow each year. The use of unmanned kamikaze boats marks what appears to be a new escalation in attacks on vital waterways.
Since November, the Houthis have been using drones and missiles to attack commercial vessels with links to the West passing through or near the Bab el-Mandeb strait, in what they say is a show of solidarity with the Palestinians in Israel's war with Hamas militants in Gaza.
On Sunday, Israeli Defense Minister Yoav Gallant said in a statement before his visit to Washington that the next phase of the Gaza conflict could expand to Lebanon. Reuters quoted Gallant as saying in a statement: "We are ready to take any action that may be required in Gaza, Lebanon and beyond."
Meanwhile, the Associated Press reported that thousands of fighters from Iranian-backed groups across the Middle East are preparing to pour into Lebanon to join Hezbollah if the conflict escalates further.
An expansion of the conflict in Gaza would almost certainly mean that the Houthis or other Iran-backed groups would step up attacks on commercial shipping in key maritime choke points such as the Bab el-Mandeb and the Strait of Hormuz. Analysts at MUFG Bank flagged these risks earlier this year.
MUFG analysts pointed out that 25% of global trade flows through three choke points: the Suez Canal, the Bab el-Mandeb Strait and the Strait of Hormuz. This means that if a larger-scale conflict breaks out, the global economy will face a serious risk of supply shocks.
Currently, global shipping companies have adjusted their routes around the Cape of Good Hope, making container shipping capacity even tighter, which in turn led to higher shipping costs.
One of the concerns of David Asher, a senior fellow at the Hudson Institute, is that if the conflict in the Middle East expands, Iran will use crude oil as a weapon to hit the US economy. He wrote in an earlier article: "Iran is preparing for an oil war: the market ignores the growing risks" and "the global oil shock could trigger a crisis similar to 2007-2008."
He noted that Tehran could use oil as an economic weapon against the West.
Given the impact of previous oil shocks on the US economy, if the Houthis begin attacking key Saudi oil facilities, Brent crude oil prices will be well over $100 a barrel. All eyes are on the Middle East.
The article is forwarded from: Jinshi Data
