Shipping Companies Halt Operations Amid Middle East Tensions

As safety concerns escalate in the Middle East, particularly around the Strait of Hormuz, major shipping companies are taking drastic measures to protect their vessels and crews. On March 11, HMM, a leading shipping line, announced it would suspend all cargo transport to the region, affecting routes that include the Arabian Gulf, the Red Sea, and East African waters. This decision comes in response to what the company describes as a significant increase in risks associated with the ongoing conflict in the area.

HMM's suspension is not merely a precaution; it reflects a broader trend among global shipping firms reacting to rising tensions in the region. The company has implemented a $1,000 surcharge per container to cover additional costs incurred from rerouting vessels and handling cargo at alternative ports. Shippers are now faced with the burden of receiving their goods at third-party ports rather than their intended destinations, leading to heightened logistical challenges.

In a notification to its customers, HMM stated that cargo already in transit would be subject to “Deviation” measures, meaning vessels would be rerouted to safe ports instead of following their original routes. This could involve unloading cargo at the nearest safe port, with shippers responsible for any extra expenses related to unloading, storage, and re-transport preparation. Furthermore, HMM has suspended new bookings for ports in the Arabian Gulf, the Red Sea, and East Africa.

The situation is compounded by actions taken by other shipping giants. Maersk, the world’s second-largest shipping company, has also suspended operations for all vessels passing through the Strait of Hormuz, imposing a hefty emergency freight surcharge of about $1,800 per container. Similarly, MSC, the largest shipping company globally, has indefinitely halted cargo bookings for shipments to the Middle East, while CMA CGM has introduced emergency conflict surcharges ranging from $2,000 to $4,000.

The heightened risks in the region are not limited to the Strait of Hormuz. On March 14, the Houthi movement in Yemen declared a military alignment with Iran, raising alarms about the potential closure of the Bab el-Mandeb Strait, a critical waterway linking the Red Sea to the Gulf of Aden. Houthi officials announced that closing the Bab el-Mandeb is a “primary option” for a full-scale naval blockade in the Red Sea, which could have dire implications for global trade.

Abdul-Malik al-Houthi, the Houthi leader, stated that his forces are prepared for action, with their “fingers on the trigger” to implement a blockade against vessels destined for the United States and Israel. This escalation raises the specter of a “double chokepoint” scenario, where both the Strait of Hormuz and Bab el-Mandeb are effectively closed to shipping traffic. Such a situation could disrupt approximately 30% of the world’s seaborne oil and significantly impact trade routes between Asia and Europe.

The Bab el-Mandeb Strait is a strategic maritime passage, with 10-12% of international maritime trade passing through it annually. In 2023 alone, around 8.8 million barrels of oil were transported daily through this corridor. The closure of this strait, combined with the ongoing situation in Hormuz, would create unprecedented challenges for global shipping and energy markets.

As the situation unfolds, major shipping companies have already begun to adjust their operations. Maersk, Hapag-Lloyd, and CMA CGM have paused all Trans-Suez sailings through the Bab el-Mandeb Strait, citing the deteriorating security situation. They are rerouting services around the Cape of Good Hope, a longer and more costly alternative that adds 12 to 15 days to sailing times and significantly increases fuel costs. This shift is expected to cause delays for perishable goods and other time-sensitive cargo.

In light of these developments, maritime security analysts are closely monitoring specific indicators that may signal an impending closure of the Bab el-Mandeb. These include the repositioning of Houthi coastal missile batteries and increased drone launch activity along Yemen’s western coast. The UK Maritime Trade Operations (UKMTO) has reported 17 attacks on civilian vessels in the region since the conflict escalated on February 28. Insurers have also reacted by sharply repricing or withdrawing war risk cover for the region, making transit commercially unviable for many operators.

As shipping companies grapple with these challenges, the implications for global trade are becoming increasingly dire. Oil prices have already surged past $110 per barrel, with analysts at Goldman Sachs warning that a credible threat to Bab el-Mandeb could push prices toward $120. The potential for a simultaneous shutdown of both straits is alarming, as it would cripple Saudi Arabia’s maritime export routes, leaving the kingdom with no viable means to transport its oil.

In summary, the ongoing conflict in the Middle East is creating a precarious situation for global shipping. With HMM and other major companies halting operations and imposing surcharges, the ripple effects are being felt throughout the industry. The looming threat of a blockade in the Bab el-Mandeb Strait adds another layer of uncertainty, raising concerns about the stability of global trade and energy markets. As tensions continue to escalate, stakeholders are left wondering how long these disruptions will last and what the long-term consequences will be for international commerce.