The persistent conflicts in the Red Sea, resulting from repeated assaults on merchant vessels by Yemen’s Houthi rebels, are adversely affecting the worldwide supply chain. According to Borge Brende, the World Economic Forum (WEF) president, this situation is anticipated to result in a $10-20 surge in oil prices for nations dependent on oil imports, such as India. Such an increase could potentially have detrimental consequences on the Indian economy.
In an interview with India Today, Brende expressed concern that the shutdown of the Suez Canal would hurt the worldwide supply chain. He expressed hope for a prompt cessation of Houthi attacks in the region.
Brende made the remarks at the 54th edition of the annual WEF meeting at Davos in Switzerland.
Attacks on vessels in the Red Sea have disrupted trade on one of the world’s most important shipping routes, adding between 10 and 15 days to transit times as ships take the safer route around southern Africa.
Brende emphasised that trade expansion decreased to 0.8 percent last year from 3.4 percent. Despite this, he conveyed optimism that global trade would experience a modest recovery this year amidst the ongoing Red Sea crisis.
“But it doesn’t take much also to hurt this if we close the Red Sea. The fact that even closing the Suez Canal for weeks will also have a very negative impact on the global supply chain. So, a lot is at stake. We also know that this has an impact on oil prices and for big oil-importing countries like, for example, India, where a $10-20 increase in oil prices will have very negative effects on the economy,” India Today quoted Brende as saying.
Commending India for its economic progress, the head of the WEF remarked that the country’s growth in the digital economy was twice as rapid as the growth in other sectors.
The Crisis
US retailer Target is experiencing some disruptions of shipments from India and Pakistan, a big region for apparel manufacturing, due to the crisis in the Red Sea, a source familiar with the matter told Reuters on Friday, calling the effect “minor” overall.
The company has faced delays in receiving some shipments, in line with the extended transit times that vessel operators are seeing, as it works with its shippers to redirect merchandise around the Suez Canal, the source said, adding the extra time and costs associated with re-routing were expected to be minimal.
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