Red Sea tensions threaten oil price volatility, trade disruption: Moody’s – Dailynewsegypt


Escalating tensions in the Red Sea are raising concerns about oil price volatility and disruptions to global trade, according to Moodyâs Investors Service and the International Monetary Fund (IMF).
The American credit rating agency warns that ongoing shipping disruptions in the Red Sea, fueled by Houthi rebel attacks, could lead to increased oil price volatility, spikes in shipping rates, and higher marine insurance costs.
While acknowledging that these price increases are unlikely to significantly impact inflation or monetary policy, Moodyâs analyst Benedicte Andries cautioned about a âdownside scenarioâ with âmuch more severe shipping disruption.â In such a situation, she predicts âmaterially increased credit riskâ for various European industries, including retail, manufacturing, and automakers.
The impact of these disruptions is already being felt. The IMFâs Jihad Azour reports a nearly 30% decline in Red Sea container traffic due to Houthi attacks, attributing adverse economic consequences across the region to the broader Israel-Hamas conflict.
He highlighted the impact on value chains and various sectors, echoing earlier reports from the UN about a 40% drop in commercial traffic through the Suez Canal in recent months.
Industry leaders are bracing for continued disruption. Hapag-Lloyd CEO Rolf Habben Jansen believes the attacks are unlikely to stop soon, potentially forcing companies to bypass the Suez Canal. He suggests a political solution and protection for cargo vessels as potential remedies within the next six months.
The Suez Canalâs significance cannot be overstated. As per a January IMF report, roughly 12% of global trade in the first half of 2023 relied on this crucial waterway connecting the Red Sea to the Mediterranean. Additionally, around 15% of global shipping traffic and a significant portion of Egyptâs foreign currency income depend on this vital route.