Impact of Houthi Attacks on Red Sea Shipping Could Raise Prices of Consumer Goods in Europe

WASHINGTON/DAVOS – The United States (US) military carried out a new strike in Yemen on Tuesday against anti-ship ballistic missiles in a Houthi-controlled part of the country as a missile struck a Greek-owned vessel in the Red Sea.

Disruptions to Red Sea shipping caused by Houthi attacks will push up prices of consumer goods in Europe in particular, an executive from port and freight operator DP World said as the impact on commerce increased.

The Iran-allied Houthi militia has threatened to expand its attacks to include US ships in response to American and British strikes on its sites in Yemen.

Attacks by the Houthis on ships in the region since November have affected companies and alarmed major powers – an escalation of Israel’s more than three-month-old war with Palestinian Hamas militants in Gaza. The Houthis say they are acting in solidarity with Palestinians.

US officials, speaking on the condition of anonymity, said the strike on Tuesday was launched at four anti-ship missiles. The strike has not been previously reported.

Two heads of international banking groups attending the World Economic Forum (WEF) in Davos said privately that they were worried the crisis might cause inflationary pressures which could ultimately delay or reverse interest rate cuts and jeopardise hopes for a US economic soft landing.

DP World CFO Yuvraj Narayan said he expected disruptions to hit European imports.

“The cost of goods into Europe from Asia will be significantly higher,” Narayan told Reuters at the annual WEF meeting in Davos, the Swiss ski resort.

“European consumers will feel the pain … It will hit developed economies more than it will hit developing economies,” the Dubai-based logistics company’s finance chief added.

War risk insurance premiums for shipments through the Red Sea are rising, insurance sources said on Tuesday.

In Spain, four factories owned by French tyre maker Michelin are planning to halt output again this weekend, a further sign of the impact of delays in the delivery of raw materials. (Reuters)