During normal times, freight costs contribute about 7% of the costs of long-haul imports. During the Covid pandemic, the International Monetary Fund estimated that global supply chain bottlenecks added about 1 percentage point to inflation. Shipping costs can have a big inflationary impact. However, crude prices have remained relatively stable and are still significantly lower than in recent months, having fallen by almost $20 a barrel since the autumn. Global oil prices rose on Wednesday as concerns over delays in the Red Sea were compounded by reports of disruption to Libya’s biggest oilfield.

Tankers transporting diesel and jet fuel from the Middle East and Asia are being diverted, while container shipments of consumer goods, commodities, clothing and food are also likely to be delayed. Redirecting ships is expected to cost up to $1m in extra fuel for every round trip between Asia and Europe, while insurance costs are also rising, adding to the overall cost of shipments. With the prospect of lengthier shipping times, there could be a knock-on impact for turnaround times at ports in the UK and large European hubs such as Rotterdam, Antwerp and Hamburg. Rerouting shipments around the Cape of Good Hope adds about 3,000-3,500 nautical miles (6,000km) to journeys connecting Europe with Asia, adding about 10 days to the duration of the trip, according to the Dutch bank ING. The route also provides a vital passage for shipments of oil from the Persian Gulf to Europe and North America. About half of freight shipped through the canal is made up of containerised goods. The Suez canal handles about 12% of global trade and is accessed by vessels travelling from Asia via the 30km wide Bab-el-Mandeb strait. How significant is the Red Sea trade route? Germany’s Hapag-Lloyd has also said its container ships would continue to avoid the route, which is a central artery for global trade on the passage from Asia to Europe via the Suez canal and the Mediterranean. Reported incidents in the Red Sea and Gulf of Aden

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