How attacks in the Red Sea are cramping global trade; what it means for retailers

CEO Matt Shay of the National Retail Federation is warning retailers and consumers to be prepared for price hikes over shipping delays caused by attacks by Iran-backed militants targeting cargo ships in the Red Sea. 

The Houthis, stationed in Yemen, have for months been firing upon commercial vessels passing through the Red Sea. The militants say the attacks are in support of Palestinians killed in the ongoing Israel-Hamas war in Gaza. Last Thursday represented the 42nd, 43rd, and 44th such attacks since Nov. 19.

"It's a big issue," National Retail Federation CEO Matt Shay said on "Cavuto: Coast to Coast," Monday. "We're helped somewhat by the fact that this is a relatively slower time of year, but what goes on here is not just the increased cost, the increased delay, but it's really the uncertainty here as we look ahead to the future."

How these attacks are hurting global trade

The attacks on commercial ships in the Red Sea by Yemen’s Iran-backed Houthi rebels forced electric car maker Tesla said it had to shut down its factory outside Berlin from Jan. 29 to Feb. 11 due to delays in supply chains.

Huge shipping container companies, including Maersk, are avoiding the Red Sea and sending their ships around Africa and the Cape of Good Hope. That adds a week to two weeks to voyages and increases costs for for shipping, fuel and more.

Because of these attacks, some of the worlds largest companies have been diverting their vessels to longer journeys around Africa that bypass the Red Sea impacting global trade further. 

Oil, natural gas, grain and everything from toys to electronics typically travel through the waterway separating Africa and the Arabian Peninsula en route to the Suez Canal, where usually 12% of the world’s trade passes.

What's so important about the Red Sea?

40% of Asia-Europe trade normally goes through the area, including a huge amount of oil and diesel fuel for import-dependent Europe. 

So do food products like palm oil and grain and anything else brought over on container ships, which is most of the world’s manufactured products.

Shipping is expensive

The cost to ship a standard 40-foot container from China to northern Europe has jumped from $1,500 to $4,000, according to the Kiel Institute for the World Economy in Germany. But that is still far from the $14,000 seen during the pandemic.

War is bad for business

The attacks by Iran-backed militias are not the only things causing concerning price hikes. 

The high cost of raw materials and energy amid Russia's ongoing invasion of Ukraine have caused basic goods like bread, milk, and meat add to the already expensive cost of living in the U.S. and Europe. 

How is the world responding?

A U.S. led coalition including United Kingdom, Bahrain, Canada, France, Italy, Netherlands, Norway, Seychelles and Spain are actively involved in an ongoing security initiative to protect ships in the Red Sea. 

The Houthis have no navy to impose any serious blockade so they resort to harassing fire and guerrilla tactics. 

FOX Business and The Associated Press contributed to this story.