Key insights
- Houthi involvement in the conflict raises the risk of a Suez Canal blockade, potentially disrupting 12-15% of global trade. Rerouting ships would add significant time and costs, leading to supply chain disruptions, increased inflation, and heightened recession risks for the US economy. This geopolitical event poses a significant downside risk to US equities.
So now the Houthis have entered the war and opened a new front. Perhaps a new blockade as well? It wouldn’t be the first time that access to and from the Suez Canal has been threatened. This would mean that any escalation by the U.S., such as a ground invasion, would result not only in a blockade of the Strait of Hormuz but also in a blockade of the Suez Canal. What does that mean?
A Suez Canal blockade would severely disrupt global trade: 12–15% of world trade volume (up to 30% of Asia-Europe containers) would reroute around the Cape of Good Hope, adding 10–14 days and up to $1 million in fuel costs per voyage, causing port congestion and supply-chain breakdowns.
An additional closure of the Suez Canal would not be a localized problem, but a major shock to the world economy. Rupturing supply chains, driving up prices (mainly because of container costs), and increasing the risk of recession or significantly stronger inflation.
Do you still believe there will be a ground invasion?