Hamas-Israel conflict hits Suez Canal, trade crisis risk, including Italy

Brussels – The crisis in the Middle East transcends land borders and reaches the sea, challenging and endangering trade flows. Since Hamas has launched its offensive against the Jewish state, another actor has chosen to take part in the conflict: the Houthis, a radical Yemeni Islamic group that is conducting acts of piracy in the Red Sea. They are targeting all ships bound for Israel, but many have begun to reconsider their trade routes. The transit along the Suez Canal is decreasing, with all the unknowns and fallout.

The European Commission is aware of the risks to the economy. The Europe-Asia link via circumnavigation of the African continent is a problem in terms of supplies and deliveries, from a time and, above all, cost perspective. Container ships are beginning to be diverted to the Cape of Good Hope, at the southern tip of Africa, adding thousands of miles to the voyages, increasing the cost of shipping from Asia to Europe and raising the perspective of a renewed inflationary shock. Not least because, with increased piracy risks and uncertainties in sea trade, the cost of insurance for companies could also be raised.

“We are monitoring the situation very closely, including for its potential impact on trade flows and food prices, but we have no specific data to provide in this regard,” a spokesperson for the EU executive let Eunews know. It is therefore difficult, for the moment, to have an overview of the impacts, which are, however, likely to be “salty”.

Italy alone has values of 154 billion euros at stake. This is the value of Italian maritime import-export transiting the Suez Canal. Having to “reroute” the ships certainly implies delays in loading and unloading also to and from Italian ports, especially those of Genoa, La Spezia, Trieste, and Gioia Tauro, the main national ports of call for containers and energy cargoes. One of the scenarios looming in the short term, according to the SRM study center, is that ships may not enter the Mediterranean by disembarking in Northern Europe. In the medium term, there should be no impact on Italy‘s total volumes, as shipments, for the most part, will still reach their destination albeit with widespread delays.

But the Egyptian strait has a bearing on the global economy, not just the tricolor one. It accounts for 12 percent of world trade in terms of transits of goods in international trade, a figure that increases to 30 percent when containers are considered. What is needed for the primary sector passes through here: 14.6 percent of the world import of cereal products passes through Suez, on par with 14.5 percent of fertilizer used in agriculture.

After the risks of food crises in the wake of the Russian-Ukrainian conflict over grain grounded in the port of Odesa, 2024 seems to be opening with scenarios of renewed crises of the same nature, with the appropriate fallout for the economy, in Italy as in the European Union.

Today’s uncertainties appear as the consequence of the EU’s foreign policy failures. The Houthis, shiite and Iran-backed, also known as “partisans of God” (Ansar Allah), seized power in 2015 by force, and now control much of western Yemen plus the capital Sana’a. Since Yemen fell into civil war, the EU has sought political mediation that has produced no results, despite appeals from actors in the region such as Jordan, which also had called for a serious foreign policy for the Middle East. The humanitarian aid that even the EU has provided to Yemen has not been enough to resolve an unstable situation that now presents a bill.