Red Sea crisis from Houthi attacks hits world trade as cost of shipping soars by 170%
EL PAÍS EnglishJan 05
Red Sea: Indian Navy Rescues Cargo Ship Crew After Houthi Strike
Image copyright: Luke Dray/Getty Images News via Getty Images
The Facts
The Indian Navy said it diverted one of its warships in the Red Sea region on Thursday to rescue a cargo ship — the Genco Picardy — after it was hit by a Houthi strike. Following the strike on the cargo vessel, which was carrying phosphate rock through the Gulf of Aden, the US military said it targeted 14 Houthi missiles that "presented an imminent threat" to both "merchant vessels" and US "Navy ships."
The Houthi missile strike, which the group claimed was a "direct hit," resulted in a fire on board the American bulk shipping boat, though India said it rescued all 22 crewmembers and extinguished the fire.
The Spin
Narrative A
If this conflict between the Houthis and the West doesn't end soon, the world could see another round of inflationary spikes. Just as the COVID-era inflation was finally repairing itself, the costs of shipping from Asia to northern Europe have now increased by 173%, and from Asia to the US by 55%. While we haven't yet seen price hikes similar to the COVID peak, economically devastating inflation could very well be on the horizon.
Narrative B
It's fine to draw parallels with COVID supply chain issues, but it's also important to recognize that shipping bottlenecks at the time were a relatively small part of the problem; the larger issue was decreasing labor participation due to virus fear, which resulted in lower productivity and higher prices. The shipping industry has been significantly hit recently, but don't expect a return to 2021-22. The disruptions caused by the Houthis are manageable.
Nerd narrative
There's a 22% chance that the US will enter a deflationary period before 2030, according to the Metaculus prediction community.