The South Asian economy would be hit the most as hostilities in the Red Sea escalated as a result of Houthi attacks. They will face the greatest proportional rise in maritime commerce distance, shipping time, and costs while the critical trade route remains closed. India’s economic outlook is jeopardized if disruptions continue for an extended period.
The Red Sea is a vital marine shipping route that connects directly to the Suez Canal, significantly shortening the maritime commerce distance between Europe and Asia and carrying a major 12 percent of global trade.
The crisis has produced significant fluctuations in the container and ocean freight markets, raising concerns about global inflation. According to India’s commerce department, Houthi rebel attacks have resulted in increased freight prices, higher insurance premiums, and lengthier transit times. The influence can result in dramatically higher prices for imported goods.
According to the Drewry World Container Index, container prices have nearly quadrupled since the beginning of the maritime crisis, reaching $3,777 for a 40-foot equivalent unit container as of January 18. The rates are 23% higher than last week.
Freight costs between China and the United States soared by 35% in a week, with similar increases observed throughout maritime routes.
The six-day blockade in 2021, as well as the eight-year closure of the Suez Canal from 1967 to 1975 (owing to the Six-Day War and the Yom Kippur War), demonstrate how delays to shipping through the Canal and the Red Sea may have a significant impact on world trade.