Oil prices jumped by more than two percent today, Friday, after the continued disruptions in the Red Sea that began late last year. By 0154 GMT, Brent crude futures rose $1.81, or 2.3 percent, to $79.22 per barrel. Meanwhile, U.S. West Texas Intermediate crude futures increased $1.80, or 2.5 percent, to $73.82 per barrel.
Disruptions in the Red Sea are severely affecting international trade on the main route between Europe and Asia, which represents about 15 percent of the world’s shipping traffic. Consequently, this has led to an increase in oil prices since the beginning of the crisis.
High shipping costs
Shipping giant Maersk said on Thursday that it would divert all ships away from the Red Sea for the foreseeable future, warning customers of further disruptions and delays.
Moreover, shipping costs through the Red Sea have risen significantly since late November. The Drewry World Container Index reveals a staggering 248 percent increase in the costs of shipping a 40-foot container from China to Europe, bringing the cost up to $4,000 today.
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Shipping giants divert
The deteriorating security situation in the Red Sea has significant implications for global supply chains. It has caused shipment delays, increased transit times, and higher shipping costs for energy and other trades. This has impacted oil prices significantly since late November.
Major shipping companies, including the Mediterranean Shipping Company (MSC), CMA CGM, and Hapag-Lloyd, were forced to suspend transit through the Red Sea and divert their ships. This strategic shift lengthens sailing times and results in additional fuel costs, which contribute to the overall rise in freight charges.
However, the rise in shipping costs is not solely due to the Red Sea crisis. Concerns regarding insufficient shipping capacity ahead of the Chinese New Year holiday further inflated prices. In addition, additional costs such as surcharges and insurance have increased, creating a complex logistical landscape.
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