BP Halts Red Sea Shipments After Houthi Attacks
London, CNN — Oil and natural gas prices rose sharply Monday after BP said it would pause all shipments through the Red Sea because of increased attacks on commercial vessels by Houthi militants from Yemen.
The decision by one of the world’s biggest oil companies follows similar moves by major shipping firms, something analysts have warned could ripple through global supply chains and increase the costs of moving goods.
“In light of the deteriorating security situation for shipping in the Red Sea, BP has decided to temporarily pause all transits through the Red Sea,” the company said in a statement. “We will keep this precautionary pause under ongoing review, subject to circumstances as they evolve in the region.”
Oil posted steep gains on the news. Brent crude, the global benchmark, was up 2.7% at $78.64 a barrel by 11:15 a.m. ET. US oil rose 2.8% to $73.44 a barrel.
The news also affected the natural gas market. Europe’s benchmark prices for the fuel surged 7.7% to above €35.75 ($39.04) per megawatt hour. Aerial assaults by the Iran-backed Houthis, who support Hamas and the Palestinian people, have become more frequent since the outbreak of the Israel-Hamas war. The militants have claimed the attacks as revenge against Israel. The United States and its allies are now considering whether to expand an existing maritime task force in the Red Sea to protect commercial vessels.
The world’s biggest container shipping companies have paused transit through one of the world’s trade arteries, which experts say could snarl supply chains and drive up freight costs. MSC, Maersk, CMA-CGM, Hapag-Lloyd, and Evergreen Group’s container shipping arm have all announced plans to avoid the Suez Canal over safety concerns.
In a further statement shared with CNN, the firm said its container ships would suspend all navigation through the Red Sea. The disruption to a key trade route between East and West could have knock-on effects on supply chains. “Global freight can expect to see rate increases, rerouting, and longer transit times,” said Judah Levine, head of research at logistics company Freightos.
More than 80% of global goods trade is moved by sea, according to the United Nations Conference on Trade and Development. Supply chain snafus and a surge in shipping costs during the Covid-19 pandemic were key drivers of inflation, as companies passed on the increased cost of moving their goods to consumers.
The latest disruption could hit consumer goods companies in Europe and North America. “Consumer goods will face the largest impact, though current disruptions are occurring during the off-peak shipping season,” said Chris Rogers, head of supply chain research at S&P Global Market Intelligence.
It’s too early to tell, however, whether there will be any sustained rise in prices and a lot depends on how long the disruption lasts, said Rico Luman, a senior economist at Dutch bank ING.
This story has been updated with additional context and developments. Anna Cooban, Rob North, and Olesya Dmitracova contributed reporting.