Energy prices surge as BP pauses oil tanker transits through Red Sea

BP said Monday that it would pause all shipments through the Red Sea because of increased attacks on vessels by Houthi militants in Yemen.

“In light of the deteriorating security situation for shipping in the Red Sea, BP has decided to temporarily pause all transits through the Red Sea,” the company said in a statement. “We will keep this precautionary pause under ongoing review, subject to circumstances as they evolve in the region.”

Oil rose sharply on the news. Brent crude, the global benchmark, was up 1.1% to $77 a barrel. US oil rose 1% to $72 a barrel.

The news disrupted the entire energy market: Futures prices for Europe’s benchmark natural gas contract jumped 5.5% by early afternoon Monday to trade at €35 ($38.20) per megawatt hour. That’s still well below the all-time high of €320 ($349.24) per megawatt hour seen in August 2022, at the height of the continent’s energy crisis, but a clear sign of disruption to energy following the attacks.

The world’s biggest container shipping companies have also paused transit through one of the world’s most vital trade arteries in a move that experts say could snarl supply chains and drive up freight costs.

MSC, Maersk, CMA CGM and Hapag-Lloyd said in recent days that they would avoid the Suez Canal over safety concerns.

“The situation is further deteriorating and concern of safety is increasing,” French group CMA CGM said in a statement Saturday as it announced that ships due to pass through the Red Sea had been instructed to pause their journeys “until further notice.”

“CMA CGM is taking all necessary steps to preserve its transportation services for its customers,” the company added.

But analysts have cautioned that the disruption to a key trade route between East and West could have knock-on effects on supply chains.

“Global freight can expect to see rate increases, rerouting and longer transit times,” said Judah Levine, head of research at logistics company Freightos.

Already, some ships are being rerouted via the Cape of Good Hope in Africa, adding up to three weeks to journey times.

“This means that one week of meaningful capacity rerouting could have ripple effects for several months ahead, after a lag of a few weeks,” UBS analysts wrote in a note Sunday, highlighting that around 30% of global container trade passes through the Suez Canal.

The analysts said that, if the disruptions persisted, shippers might be able to “lock in higher-than-expected rates” as they renegotiate long-term contacts in the coming days and weeks.

This is a developing story and will be updated.

Anna Cooban and Rob North contributed reporting.