Danish shipping giant Maersk announced Tuesday that it will halt all shipping through the Red Sea and Gulf of Aden following the weekend attack on one of its vessels from Houthi militants, CNBC reported.
The company’s decision extends the 48-hour pause it implemented on Sunday in the aftermath of the attack by the Yemen-based rebels.
“We have made the decision to pause all transits through the Red Sea/Gulf of Aden until further notice,” the company reportedly told customers in an update.
On Tuesday, oil prices jumped more than 2% on tensions in the region but gave up those gains later in the day. According to CNBC, U.S. crude fell 82 cents, or 1.14%, to trade at $70.83 per barrel, while Brent dropped 68 cents, or 0.88%, to trade at $76.36 per barrel.
Helima Croft, head of global commodity strategy at RBC Capital Markets, told CNBC that oil prices are not indicative of the current regional friction because traders are not confident that a major supply disruption is coming.
“The market is basically saying ‘we will wait and see until something happens,’” Croft said. “But it’s really getting much more serious every day.”
The Maersk Hangzhou was attacked on Sunday by four small boats of Iranian-backed Houthi militants, who reportedly attempted to board the vessel. During the attack, the ship was struck by an unknown object but was able to continue on its way, according to LSEG shipping data.
Responding to a distress call from the Maersk Hangzhou, U.S. Navy helicopters successfully repelled the assault, sinking three boats and killing 10 of the attackers.
“An investigation into the incident is ongoing and we will continue to pause all cargo movement through the area while we further assess the constantly evolving situation,” Maersk said in the Tuesday update.
The company said that vessels will be rerouted and continue their voyage around the Cape of Good Hope in Africa when feasible. Redirecting ships around the southern tip of Africa is expected to cost up to $1 million in additional fuel for each round trip between Asia and northern Europe.
In response to the Israel-Hamas war in Gaza, Houthi militants have launched multiple attacks on vessels in the Red Sea in recent weeks, raising concerns about global trade disruptions.
According to RBC Capital Markets, approximately 12% of global trade and 3 million barrels of crude oil cross the Red Sea every day.