What does the "Red Sea blockade" mean when oil prices soar, shipping stocks surge, global capacity is reduced by 20%, and Israel's imports are affected by 30%?

The attack on the Red Sea cargo ship has shocked the global trade market.

On Monday, international crude oil rebounded significantly, with Brent crude oil rising nearly 4% at one point. It has now risen for 5 consecutive trading days.

Global shipping stocks have surged, with global shipping giant Maersk rising nearly 5% at one point on Monday, accumulating a 16% increase over the past 5 trading days. Italian oil tanker D'Amico, German shipping company Hapag-Lloyd, and Norwegian oil tanker Hafnia saw increases ranging from 4% to 7% on Monday, continuing the surge from last week. A-share China COSCO Shipping, China Merchants Energy Shipping, and other stocks also hit the daily limit on Monday.

This means that after the recent frequent attacks by Houthi militants on cargo ships in the Red Sea, the risk of the Israeli-Palestinian conflict spilling over has intensified and has already affected international shipping. Analysts predict that there may be more trade disruptions in the future, with 20% of global capacity consumed due to transportation delays, 30% of Israel's imports affected, and the risk of closure of the "artery" of shipping, the Suez Canal.

20% of global capacity and 30% of Israel's imports affected, further exacerbating the risk of supply chain disruptions

Since the outbreak of a new round of conflict between Israel and Hamas in early October, more than a dozen cargo ships passing through the Red Sea have been attacked, and several major shipping and oil transportation companies have suspended services through the Red Sea.

Mediterranean Shipping Company (MSC), Maersk, Hapag-Lloyd, CMA-CGM, Yang Ming Marine Transport, and Evergreen Marine have all announced changes to their scheduled Red Sea routes to ensure the safety of sailors and vessels. Overall, these shipping companies account for about 60% of global trade. In addition, British Petroleum (BP) and European oil and gas giant Equinor announced on Monday that they would suspend all transportation through the Red Sea.

Evergreen Marine also stated that it will temporarily stop accepting goods bound for Israel and suspend its transportation services to Israel.

"About 30% of Israel's imported goods are transported by container ships through the Red Sea. These ships need to be booked 2-3 months in advance for the transportation of consumer goods or other products. This means that if the journey is now extended, it is not worth importing products with a shelf life of 2-3 months from the Far East," said Yoni Essakov, a member of the Israel Shipping Chamber's executive committee.

Essakov added, "Due to the uncertainty, importers will need to increase inventory and pay more costs, while others will lose market share due to the lack of competitiveness in terms of listing time."

According to an earlier article by Wall Street CN, Peter Sand, Chief Analyst at maritime consulting firm Xeneta, said, "The possibility of the Suez Canal (connecting the Mediterranean and the Red Sea) closing is small, but the risk still exists."

Source: Wall Street CN"Global shipping is expected to experience some kind of overreaction in the short term, and the cost of trade transportation through the Suez Canal may soar."

"Approximately 19,000 ships pass through the Suez Canal each year," said Michael Aldwell, Executive Vice President of Maritime Logistics at Kuehne+Nagel, the world's largest ocean freight forwarder. "It is expected that waterway delays will consume 20% of the global shipping capacity, thereby impacting the availability of shipping resources."

He added that there will also be delays in returning empty containers to Asia, which will only exacerbate the challenges in the supply chain.

Moody's highlighted the situation in a report to its clients.

Daniel Harlid, Senior Credit Officer at Moody's, wrote: "If this situation persists for more than a few days, it will have a positive credit impact on the container shipping industry, as well as the tanker and dry bulk markets." "However, it also increases the risk of further disruptions in the supply chain."