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Energy crisis looms as Houthi attacks intensify

Iranian-backed Houthis approach a cargo ship in the Red Sea

January 1, 2024 - 3:00pm

Danish company Maersk has once again called a halt to shipping through the Red Sea, after another of its vessels was attacked by Iran-backed Houthi rebels. This is the first successful Houthi attack on a ship since the United States launched Operation Prosperity Guardian on 18 December, aimed at protecting commercial shipping in the Red Sea.

The Maersk Hangzhou was not an Israeli ship; rather, it was Danish-owned and operated, and was flying Singaporean colours. Clearly, it is not just Israeli ships which are under threat, and it is unsurprising that Maersk announced that it would once again halt shipping through the Red Sea. Even if it wanted to continue shipping, insurance companies would likely express serious concerns and hike premiums for ships travelling in the region.

This has been the problem with Operation Prosperity Guardian since its launch. While the US Navy should be able to provide protection for ships in the region, it cannot guarantee it all the time. That it took less than a fortnight for another ship to be hit by the Houthis raises serious concerns for other shipping companies which may now have to take the much longer route around Africa.

Now, an escalation does not just appear possible but likely. If wider conflict in the Middle East were to occur, this poses a major threat to the global economy too. The EIA states that the Red Sea is “critical” for international oil and gas flows, with around 12% of seaborne oil and 8% of worldwide LNG passing through the region. Any major disruption to the Red Sea transit routes would undoubtedly put upward pressure on energy prices, and from there, on inflation.

Oil makes up only around 20% of goods shipped through the Red Sea. In addition, approximately 12% of all global trade and 30% of container ship traffic pass through the region too. This means that price pressures would not just be felt via the energy markets, but also in the general market for goods imports — especially in Europe. Avoiding the Red Sea will require ships taking the alternative route around Africa, which adds around 40% onto their travel time. Thes

This is creating an impossible situation for the Western countries. Yesterday the British government stated that it was open to the possibility of striking the Houthi rebels using the Royal Air Force. Some reports suggested that this might be a joint operation with the Americans. But it is unclear what this means. The Houthis are effectively guerrilla fighters who, like the Taliban in Afghanistan, have no fixed bases. Extensive experience in the Middle East suggests that ground operations are required to deal with threats of this kind, and even then the success of such operations is limited. By committing to intervene with air strikes the British government is risking getting pulled into another Middle Eastern quagmire. 

In the meantime, the Biden administration will likely move to put more pressure on the Israelis behind the scenes to resolve the crisis in Gaza. It is no secret that the Americans are becoming increasingly impatient with Israel. At the same time, the Israelis are clearly signalling that they view the war in Gaza as one they want to fight to the bitter end. This puts Biden in an impossible position. The President does not want to be seen to be going hard on Israel, but the last thing he needs is another bout of inflation and economic chaos. 2024, then, is shaping up to be Biden’s most challenging year yet.


Philip Pilkington is a macroeconomist and investment professional, and the author of The Reformation in Economics

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Malcolm Webb
Malcolm Webb
6 months ago

Yet another reason why the destruction of U.K. indigenous oil and gas production ( now at its lowest level in 50 years) by ill informed ( or blithely utopian) politicians is such an awful act of self harm.

Burke S.
Burke S.
6 months ago
Reply to  Malcolm Webb

An island made of coal facing energy shortages. Utterly insane, yet only possible with a Navy guaranteeing flee flows of ships around the world.

God forbid that flow stops one day soon.

Last edited 6 months ago by Burke S.
Pedro the Exile
Pedro the Exile
6 months ago
Reply to  Burke S.

Don’t worry-Boris has told us we are going to be “the Saudi Arabia of wind power”…

D Walsh
D Walsh
6 months ago
Reply to  Malcolm Webb

The North Sea oil ond Gas has passed peak production, unfortunately its decline can’t be stopped

Susan Grabston
Susan Grabston
6 months ago
Reply to  Malcolm Webb

Indeed. We have made ourselves independent in both food and energy in our set-up in response to government lunacy. I have spent far too much of my life scanning the horizon for incoming risk, at the expense of living in the moment. However, I think i may get “payback” over the next 5 years as we weather the storms. In any 80+ year lifetime there will.inevitably be a 4th turning.

Jerry Carroll
Jerry Carroll
6 months ago
Reply to  Susan Grabston

Lay in a large stock of cold weather clothing to wear indoors where you will be confined by winters to come. And firewood, plenty of it. Raise rabbits like they did in WW2. A good source of protein.

Susan Grabston
Susan Grabston
6 months ago
Reply to  Jerry Carroll

Thanks Jerry. I’ve learned to pickle and can and we grow our own, but I haven’t made it as far as rabbit. My mum (irish farming stock) is still with us and remembers the rationing of the 1940s. She’s been very wise counsel on our journey. I did it for pactical ends but have fallen in love with the lifestyle. Not quite talking to vegetables yet, but loving the visceral connection between food and fork.

Susan Grabston
Susan Grabston
6 months ago

In a post America world, with piracy and war on the increase you will have to protect shipping lanes to access energy. The reach of.your nmavy becomes critical. For the UK that means Scandinavia (particularly Norway) and West Africa. This is also critical for deep sea cables (eg Morroccan solar farms) affecting both energy and connectivity.
As others have said, energy sources are less plentiful and more costly to extract. I would have more respect for governments that promoted alternatives for this reason than Net Zero (need vs virtue signalling). It would also make it easier to get nuclear on the table. Sadly the window for.SMR invedtment is closing.
The UK’s travails go back to Nick Clegg’s disastrous decision to say no to nuclear in 2011. The fact that local production of oil and gas is now at such low levels is turning a very difficult situation into a disaster.
What needs to happrn from here?
1. Increase defence spending
2. Create an immediate plan for nuclear under emergency planning laws
3. Turn.on the local.energy spiggots.
4. Stateism to.direct capital.flows over.next 10 years, but no longer (we don’t want.to be left with the equivalents of British coal, British Leyland and Concorde.by 2055).
In terms of mindset I would say war footing on speed and resiliance.
The wild card is innovation – can we pull off something which can provide energy which we.can access and which is plentiful. So much effort going into this right now.

Last edited 6 months ago by Susan Grabston
Richard C
Richard C
6 months ago
Reply to  Susan Grabston

The timeline from innovation to production of usable power at scale is too far off for this to be a viable policy option. Other options like, Morroccan solar farms are not credible options. They generate, at best, 20% of rated capacity and the longer the transmission distance, the lower the yield actually delivered to end users; best case, 15% of rated capacity.
We have to use what we have and what we can get with existing technologies.

Susan Grabston
Susan Grabston
6 months ago
Reply to  Richard C

I agree Richard, but going for a miracle. Energy is life after all and the lack of it will create unimaginable dislocations of mind and body.

Arjen van der Schoot
Arjen van der Schoot
6 months ago

Chinese exports to Europe are significantly impacted by the detour around the Cape right at the time that the country is hoping to revive their export growth engine, so it will be interesting to see how Chinese diplomacy will address this issue, especially after touting diplomatic victories in the Middle East earlier this year.

Susan Grabston
Susan Grabston
6 months ago

Good point

Sayantani Gupta
Sayantani Gupta
6 months ago

A tangled skein of a conflict indeed, but haven’t the Houthis been emboldened by the remarkable US quietude in East Asia where CCP got away with repeated attacks on Filipino patrols?
There are other players behind the Houthis and I wish the author would have delved into that aspect too, other than hinting at the usual suspect in the Persian Gulf.

Charles Stanhope
Charles Stanhope
6 months ago

Pakistan perchance?

Sayantani Gupta
Sayantani Gupta
6 months ago

If you see who loses the most in the Middle East from a renewed civil war in Yemen and the stoppage of Red Sea traffic- it’s MBS, UAE and Al Sisi in Egypt. Who gains? CCP, Qatar and some Neo Cons, as well as the junta in Pakistan from renewed arms deals with the US.

Susan Grabston
Susan Grabston
6 months ago

US has lost the art of.deterrence. Trump was very good at it for.all the wrong reasons, Biden signalled US withdrawal with Afghanistan. Peter Zeihan worth reading on the Post America world. .His book – the end of the world is just the beginning – was published 18 months ago, and so far his roadmap is absolutely spot on. Recommended for the density of data; the writing is appalling.

Sayantani Gupta
Sayantani Gupta
6 months ago
Reply to  Susan Grabston

Yes, it’s on my long bucket list of ” to read”!
Actually the problem with the US policy now is overstretch combined with confusion.
All while CCP is dead serious about its aims.
Incidentally the latter have naval bases in Djibouti as well as Gwadar and the Houthis are not attacking their ships- so the presumption of losses to them is not correct.

Charles Hedges
Charles Hedges
6 months ago
Reply to  Susan Grabston

What is needed are people on the ground who speak the languages fluently, know leaders personally, understand family relations within and between clans, the religions, history( this conflict between Shia and Sunni started 1200 years ago ) and have the support of highly skilled special forces. For the Yemen, British involvement in the 1960s and Dhofar in the 1970s, a book by Ken Connor ex SAS NCO called “Ghost Force ” explains the politics and the problems fighting in the area. Connor served in the SAS from 1963 to 1986.
Unless those in command understand family connections there will be little success.

Burke S.
Burke S.
6 months ago

Oh no, if the US doesn’t act then how will China ships its goods, and OPEC ship its oil, to Europe? Wait
why is this the US Navy’s job?

Maybe the US Navy shouldn’t be guaranteeing our competitors access to the open seas. Besides, China and Saudi will have no qualms about solving guĂ©rilla wars the old fashioned way: Genocide.

El Uro
El Uro
6 months ago
Reply to  Burke S.

Such a solution is usually called “genocide” by university professors, their students and childless women who passionately sympathize with determined young people with Kalashnikovs in their hands; Moreover, the word “genocide” is used more often, the further those who pronounce it are from the mentioned young people.
As soon as a woman has children, she immediately understands that the health and well-being of her children is much more important than the charm of the exploits of young heroes, and the sooner they are called to order, the better. It doesn’t matter how.
Students mature more slowly. Child free women and university professors – never

Last edited 6 months ago by El Uro
Paul MacDonnell
Paul MacDonnell
6 months ago
Reply to  El Uro

First rate observation.

Jerry Carroll
Jerry Carroll
6 months ago
Reply to  El Uro

Was it a mistake to give women the vote? I think the case can be made.

D Walsh
D Walsh
6 months ago
Reply to  Burke S.

The Saudis have been fighting the Houthis for years, with little success

China is not the US, they have no interest in foolish wars

Brian Villanueva
Brian Villanueva
6 months ago

A kamikaze drone carrying a grenade costs a hundred dollars to produce from readily accessible components made in China.
The interceptors cost more than $100K to produce and require a complex supply chain, many legs of which also (ironically) begin in China.
This is not a lose-lose for the Americans. If they hit everything, they’re being once again bled dry financially by a bunch of Allah’s hillbillies in caves. If they miss a few and some commercial ships get hit (god forbid sunk) the Americans look like paper tigers.

David Lindsay
David Lindsay
6 months ago

What, exactly, does anyone propose to bomb in Yemen? There was precious little there before, with British Officers in the control room, the Saudis and their associates began a war to install a puppet regime. That went on for nine years, creating the worst humanitarian crisis in the world, but it still ended in failure. Organised mass abstention in support of it was the largest Labour rebellion of the Corbyn years. But notice that apart from Bahrain doing what a service station exists to do, no Arab country is playing any part in this latest excursion.

Everything that was said about Afghanistan is being said about Yemen, and everything that was said about the Taliban is being said about the Houthis. It was all true then, and it is all true now. But the Taliban still won. You were beaten even by that, and you will be beaten even by this. It took you 20 years to lose to a rabble in Afghanistan. Are you prepared to spend 20 years losing to a rabble in Yemen? Although while the Houthis are poor, they are not unsophisticated as such. Brush up on Zaydism, which is about to become important. And on Ibadism. You read it here first, as you often do.

An overall majority for either main party would be taken as a public endorsement of this war, among so very many other horrendous things at home and abroad. But when I tell you that there is going to be a hung Parliament, then you can take that to the bank. I spent the 2005 Parliament saying that it was psephologically impossible for the Heir to Blair’s Conservative Party to win an overall majority. I predicted a hung Parliament on the day that the 2017 General Election was called, and I stuck to that, entirely alone, all the way up to the publication of the exit poll eight long weeks later. And on the day that Rishi Sunak became Prime Minister, I predicted that a General Election between him and Keir Starmer would result in a hung Parliament.

To strengthen families and communities by securing economic equality and international peace through the democratic political control of the means to those ends, including national and parliamentary sovereignty, we need to hold the balance of power. Owing nothing to either main party, we must be open to the better offer. There does, however, need to be a better offer. Not a lesser evil, which in any case the Labour Party is not.

Rocky Martiano
Rocky Martiano
6 months ago
Reply to  David Lindsay

You’re quite the Mystic Meg, aren’t you. I’m not sure who ‘we’ are in your political scenario, but I can guess. And please note, it’s not ‘anyone’ proposing to bomb Yemen, it’s that renowned military strategist, Grant Shapps.

David Lindsay
David Lindsay
6 months ago
Reply to  Rocky Martiano

Right about Kosovo, right about Afghanistan, right about Iraq, right about Libya, right about Syria, right about Yemen the last (still ongoing time), right about Artsakh, and daily proven more and more right about Ukraine. You should pay attention.

UnHerd Reader
UnHerd Reader
6 months ago

Sea exploration to the east was developed because of the blockage of landroutes under different non- European rulers. We are assuming the route around the Cape is viable longterm, yet based on global power play there is no guarantee with regards horn of Africa, east or southern African countries being open long term to support the moves to maintain the status quo.

David Lindsay
David Lindsay
6 months ago

Certain newspapers and television stations claim every day that the Channel is undefended such that an invasion has been going on for years. Yet they will be campaigning ferociously for the governing party this year. And they affect to have every confidence that the Red Sea could be pacified by the same Navy under the same political direction.

Meanwhile, they report that, at the insistence of City of London insurers, British merchant shipping in the Red Sea will be flying the Chinese Ensign, at whatever price the Chinese felt like charging. Containing many people who know the true state of the Royal Navy and who know the Arab world well, Toryland is not behind this war. The only solution to the situation in the Red Sea is a ceasefire in Gaza.

The Houthis have themselves become an example of how easy it is for a government to maintain an off-the-books force whose 10-a-penny drones cost the Americans one million dollars per shot to take down. There are already many more, and there could be many more again. Look at the countries that have to be passed in order to go round the Cape of Good Hope. Various combinations of Islam, Chinese clientelism, and Russian alliance, all the way down to the South Africa that has invoked the Genocide Convention against Israel, and then all the way back up again. Welcome to Africa, which is also the real beating heart of Evangelical Protestantism, now sending missionaries to Europe, as is the Catholic Church there, which is likely to provide the next Pope. Look at the United Nations voting record, and think on.

Membership of the BRICS doubled today, and one of the new members is the United Arab Emirates, which will soon own the Telegraph Group. In its present form, the flagship of that is so delirious with demob happiness and with the death rattle that it is publishing John Bolton, who as much as anything else would certainly not be reprising his role in a Trump Administration. Even by Keir Starmer’s usual standards, how ridiculous he looks for having tried to cosy up to the Telegraph as we have known it. Its last days should also be his, in these days when topdrawer Arabism may be returning to the Foreign Office to protect us from his jumped-up oikishness and from Tony Blair’s.

Last edited 6 months ago by David Lindsay
Charles Hedges
Charles Hedges
6 months ago

I suggest the western navies regain the courage and skill of the mariners who served on Operation Pedestal . Operation Pedestal – Wikipedia
SS Ohio (1940) – Wikipedia
Dudley Mason – Wikipedia
Captain Mason’s GC was not only for his personal courage and determination but for his crew. Other gallantry awards to the crew of Ohio during Operation Pedestal included a Distinguished Service Order, five Distinguished Service Crosses and seven Distinguished Service Medals.

Jerry Carroll
Jerry Carroll
6 months ago

I expect the Houthis will be feeling more of a bite as time goes on.

William Brand
William Brand
6 months ago

Israel shows stupidity in this war. They fight military but Hamas fights political. Hamas wins in court of America opinion. Israel can loose all its allies and logistial aid.

Steve Jolly
Steve Jolly
6 months ago

It’s lining up to be a tough year for Grandpa Joe. The events couldn’t possibly line up worse for him or better for his opposition. The hilarity of spending million dollar missiles to shoot down thousand dollar drones is not likely to escape the attention of populist leaning politicians. Oh, and by the way, none of these ships is owned by US companies, nor are any of them taking goods to or from the US. Nothing originating from or going to the US would pass that way regardless of where it was coming from by virtue of simple geography. Opportunistic politicians are bound to point out these facts, and that will prompt people to ask, “Why are we paying for this.” Biden has no good answer except the same crap we’ve been hearing for the past several decades about how global trade benefits ‘everyone’, and while that may be true, it’s hard to see, hard to measure, and weighed against the things Americans can see and measure, doesn’t amount to much. The genie is out of the bottle and it won’t get put back. I almost feel sorry for Joe, then I remember he’s part of the establishment whose failures brought us to this point. As I said from the start, if they want to find their bogeyman, the source of Trump, Brexit, and populism, they need only point at the nearest convenient mirror.

David Lindsay
David Lindsay
6 months ago

I could wonder why I subscribed to this thing, you know.

Gordon Beattie
Gordon Beattie
6 months ago
Reply to  David Lindsay

I am beginning to think the same thing

David Lindsay
David Lindsay
6 months ago
Reply to  Gordon Beattie

I posted that, and my earlier posts appeared.