Shipping trade, illustration
Shipping trade, illustrationIstock

Shipping has become a hot topic due the effects of conflicts in the Middle East on the shipping industry. These conflicts inevitably have subsequent effects on maritime jobs and those working in shipping.

For centuries, the Middle East has been instrumental in global trade because of its location – shipping routes connecting Europe and Asia pass through the Middle East. Historically, this has meant countries competing for control over the region and the resources available.

KEY SHIPPING POINTS IN THE MIDDLE EAST

The Suez Canal

The single most important strategic location for shipping in the Middle East is the Suez Canal, which was opened in 1869. It connects the Red Sea with the Mediterranean Sea and allows ships to avoid the length and dangerous journey around the southern tip of Africa. Almost 10% of global trade passes through the Suez Canal, which means nearly 20,000 ships and 1 billion tons of cargo annually.

Many conflicts have arisen around the Suez Canal, chiefly the Suez Crisis of 1956 and the Arab-Israeli wars. Blockades, closures of the canal and security and accessibility concerns from political instability in Egypt have featured in recent times. In 2021, the blockage from the Ever Given container ship illustrated the vulnerability of the canal, as it caused delays of $9 billion per day in terms of value of goods.

The Strait of Hormuz

The Strait of Hormuz sits between the Persian Gulf and the Gulf of Oman. It is the busiest oil transit checkpoint in the world with approximately 20 million barrels of oil per day passing through this passage, which accounts for around 20% of global petroleum consumption.

The Iran-Iraq war in the 1980s saw both countries targeting oil tankers in the strait. Ongoing tensions between Iran and the West continue to threaten the safety of the channel for ships with sporadic instances of harassment and seizure of vessels. In 2019, an oil price spike of over 5% arose as a result of these tensions.

The Bab El-Mandeb Strait

A further significant shipping channel is the Bab el-Mandeb Strait, which links the Red Sea to the Gulf of Aden. Approximately 6 million barrels of oil per day pass through this strait.

Piracy off the coast of Somalia and continued conflicts in Yemen have made this shipping passage dangerous. There has been a rise in attacks on ships and piracy incidents in the Gulf of Aden reached over 200 in 2011.

Impacts of Conflicts

The conflicts naturally lead to increased shipping costs because of detours, higher insurance premiums and naval escorts for protection. For example, re-routing from the Suez Canal to the southern tip of Africa adds over $300,000 in fuel costs for a single ship.

Supply chains worldwide are also impacted from any shipping delays, which is significant for manufacturing industries that increasingly rely on just-in-time operating models.

In addition, the conflicts cause volatility in energy markets, notably oil prices. This impacts economies dependent on energy imports.

Mitigation Strategies

In response to conflicts in the Middle East, shipping companies are exploring alternative routes. For example, the Northern Sea Route through the Arctic. This is a shorter route but does present different challenges in terms of ice conditions and inaccessibility during certain months of the year.

Countries are also enhancing security to protect shipping routes. Examples include using naval patrols and private security contractors. And the International Maritime Organisation (IMO) is supporting greater international co-operation to fight piracy.

Technology, too, is offering solutions for the shipping industry. Unmanned drones and satellite monitoring are being engaged to offer added protection by detecting potential threats in areas prone to conflict.y

The conflicts in the Middle East have had, and continue to have, a far-reaching impact on global shipping, especially between Europe and Asia. International trade has huge reliance on key maritime locations in the Middle East, but the exposure to geopolitical instability in the region cannot be overstated. Costs, delays and volatility emerge because of conflict, and these are ultimately passed onto consumers in higher charges for goods and services. The international community - political and within the shipping world must work together to build resilience into shipping networks and monitor the fragile environment of the Middle East carefully and judiciously.