Will gas prices spike in US as cargo ships are attacked in Mideast? Experts weigh in

Shipping companies are scrambling to reroute their vessels in the wake of recent attacks in the Red Sea, triggering delays that could have a ripple effect on the global economy.

Over the past two months, Houthi rebels in Yemen have fired over 100 rockets at commercial ships in the Red Sea, a vital artery of international trade through which nearly one-third of global container traffic flows.

A dozen vessels have been “attacked, harassed, or interfered with,” including two that were attacked on Dec. 19, a defense official told McClatchy News.

The attacks are being directed at ships bound for Israeli ports, a Houthi spokesperson said in a post on X. They are being launched in retaliation to Israel’s military operation in Gaza, which has left nearly 20,000 people dead, according to Gaza health officials, and been called a “humanitarian nightmare” by the United Nations’ secretary general.

In response to the attacks, several major shipping companies have planned to give wide berth to the region, instead seeking out alternative routes.

By bypassing the Red Sea, ships will be forced to travel thousands of extra miles to reach their destinations, causing delays and inflating prices, particularly for oil and gas, experts told McClatchy News.

However, experts disagreed about the severity and duration of such supply chain disturbances, depending on whether the U.S. Navy’s newly bolstered presence in the region lessens the attacks.

‘Unprecedented’ rerouting

Following the Houthi attacks, “four of the largest container shipping companies” — Maersk, MSC, CMA-CGM, and Hapag Lloyd — “have announced that they’re rerouting,” Mary Brooks, a professor emerita at the Rowe School of Business, told McClatchy News.

“This is huge,” Brooks, who studies global shipping, said.

BP — one of the world’s largest oil companies — also paused all traffic through the region “in light of the deteriorating security situation,” a company spokesperson told McClatchy News.

This kind of mass course correction is unprecedented, Phillip Wolfe, the director of pricing & procurement at American Global Logistics, told McClatchy News.

“I’ve been doing this for almost 12 years and haven’t seen anything quite this drastic,” Wolfe said.

The last comparable disruption occurred in March 2021 when the cargo vessel Ever Given became stuck in the Suez Canal, which connects the Red Sea to the Mediterranean, delaying over 300 ships and supplies destined for seven American ports, Wolfe said.

“The Ever Given was stuck for six days, but this could go on longer than that,” Wolfe said.

Around 50 tankers pass through the Suez Canal every day, but recently “as many as 32 per day have been rerouted,” Michael Manjuris, the chair of global management studies at Toronto Metropolitan University, told McClatchy News.

“The situation is evolving quickly so the number of carriers impacted could change tomorrow,” Allen Morrison, a professor at the Arizona State University, told McClatchy News.

Alternate routes

Rerouted ships bound for North America are left with two possible routes, which take them through the Panama Canal or around the Cape of Good Hope off South Africa, Wolfe said. Both options would add between several days and weeks of travel time.

Complicating matters further, the Panama Canal, a 50-mile man-made waterway connecting the Atlantic and Pacific Oceans, is currently beset by a crisis-level drought, meaning wait times will be elevated, Wolfe said.

“They’ve already reduced the number of ships going through,” marking the first-ever restriction on vessel quantity in the canal, “so you’re going to see a delay of six to eight days extra,” Wolfe said.

Ships that elect to go around the southern tip of Africa would face even longer delays of two weeks or more, Wolfe said.

As a result, “large delays” will affect the North American market — though Europe and Asia will be impacted more quickly, Trevor Heaver, a professor emeritus at the University of British Columbia, told McClatchy News.

Effect of delays on prices

It’s likely that the cost of such delays will eventually trickle down to consumers, Wolfe said.

“It’s going to cost the carriers, I believe, an extra million in fuel cost to go around Africa, so they’re not going to absorb all those costs on their own,” Wolfe said. “At some point, I think, they will pass that along.”

Prices of oil and gas, which are typically very reactive to the market, are expected to hedge up, along with other general commodities, Wolfe said.

Not all experts who spoke with McClatchy News agreed on that point however. Morrison, for instance, downplayed the size of effects on North America, saying “shipping of consumer products to the U.S. from Asia — where China is the top supplier — generally does not rely on the Suez Canal. So, the impact on U.S. consumers is not significant, at least for the time being.”

“It is much more of an issue for European consumers and Mediterranean port operators,” Morrison said.

Some American markets, though, have already felt the effects of the announced reroutings, Manjuris said.

“The price of West Texas Intermediate oil is already starting to creep up. It’s creeped up one or two dollars a barrel,” Manjuris said. “This is traders saying this delay may happen, so we better price it in now for future contracts.”

If oil prices continue to rise, though, it’s likely the Biden administration will tap into the Strategic Petroleum Reserve — as it did following Russia’s invasion of Ukraine in 2022 — in an attempt to offset price increases, Manjuris said.

But, in order for price increases to be significant and sustained, the Houthis would need to continue their attacks on ships in the Red Sea, a tactic which could soon be curtailed, Manjuris said.

Unclear timeline

Secretary of Defense Lloyd Austin announced Operation Prosperity Guardian on Dec. 18, which established a naval task force composed of nine countries, including the U.K., France and Bahrain, with the purpose of responding to the Houthis’ “reckless” attacks.

The ramped up military presence in the region should make “these diversions disappear,” Manjuris said, though he stipulated “it’s a volatile situation and in a couple of weeks this could all change.”

Pushing back against predictions of a quick resolution, Morrison said, “The situation is not going away anytime soon.”

Houthi spokesperson Mohammed Abdulsalam told Reuters on Dec. 19, “Our position will not change in the direction of the Palestinian issue, whether a naval alliance is established or not.”

“Our position in support of Palestine and the Gaza Strip will remain until the end of the siege, the entry of food and medicine,” Abdulsalam added, “and our support for the oppressed Palestinian people will remain continuous.”

A cessation of hostilities in Gaza would go a long way toward decreasing the attacks in the Red Sea, Morrison said.

“However, it may take several months for relative calm to prevail,” meaning some shipping companies may take a different tack for the foreseeable future.

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