Terror attacks on Red Sea shipping lanes could reverse recent efforts to curb inflation in the European Union, economic experts have said.
Apparently in response to Western support for Israel, Houthi rebels in Yemen have targeted ships they perceive as belonging to Europe and/or the US, the latest being on December 26.
Such actions have forced many vessels to re-route away from the Red Sea and Suez Canal, resulting in heavily increased shipping times.
Economists now fear that the attacks could wreak financial chaos in the longer term, according to UK newspaper The Times on December 26, with global markets already seeing a spike in oil prices over the Christmas week.
“The risk of a new round of ‘cost-push induced inflation’ has increased substantially,” Maartje Wijffelaars, a senior expert at Rabobank warned regarding the potential impact on the Eurozone.
Sarah Breeden, the Deputy Governor for Financial Stability at the Bank of England (BOE), issued a similar warning, saying the BOE was already factoring in the attacks to its economic forecasts.
“It is a volatile situation that is only just arising, but we have highlighted and incorporated in our latest projections the upside risks to inflation from developments in the Middle East,” she said.
The Eurozone is set for economic downturn, with leading economists telling Brussels Signal “sticky inflation” will hold growth to below 1 per cent through the whole of next year. https://t.co/PakL7zZ24Y
— Brussels Signal (@brusselssignal) December 1, 2023
The Houthi attacks are among the latest international crises that have sprung from the ongoing conflict in Israel and Palestine.
European leaders have struggled to come up with a co-ordinated response to the terror incidents, with many EU Member States pulling out of a recent joint marine task force aimed at halting the Houthi attackers before they could act.
Other efforts to muster a specific EU effort to combat the terrorists have also failed, with Spain openly expressing doubt that the issue could be tackled using Operation Atalanta, the bloc’s counter-piracy force in Somalia.
Spanish Prime Minister Pedro Sánchez said the force had “neither the characteristics nor the nature required for the Red Sea”.
“We are willing and open to considering such a [counter-piracy] operation but not within the framework of Operation Atalanta,” he added.
The opening ceremony for the 2024 Summer Olympics in Paris may be abandoned over terror fears, French President Emmanuel Macron has warned. https://t.co/NL7Wdo5U5x
— Brussels Signal (@brusselssignal) December 22, 2023