The United States is preparing to defend Red Sea shipping lanes where attacks from Iran-backed Houthi rebels have caused commercial traffic to come to a halt and financial markets to reel.
The Yemen-based, Iranian-backed group has been launching rockets and drones at southern Israel for weeks in support of the terrorist organization Hamas. It has also targeted merchant ships in the Red Sea, as reported by Zero Hedge.
The increased risk to shipping has forced BP to halt the passage of its oil tankers through the Red Sea, causing oil prices to jump by more than 2% on Monday, The Hill reported. Practically all major shipping companies in the world have been forced to abandon Red Sea routes due to the Houthi attacks, as reported by multiple outlets, including The Times of Israel.
Insurance premiums reflect the increasing danger in the area. They have risen from 0.07% of the value of a ship in early December to between 0.5% and 0.7% as of Monday.
Defense Secretary Lloyd Austin announced a major U.S.-led naval coalition to better position defenses in the area.
“I am announcing the establishment of Operation Prosperity Guardian, an important new multinational security initiative under the umbrella of the Combined Maritime Forces and the leadership of its Task Force 153, which focuses on security in the Red Sea.”
The operation will include military assets from several countries, including the United Kingdom, Bahrain, Canada, France, Italy, Netherlands, Norway, Seychelles, and Spain, according to Austin’s statement.
Zero Hedge cited the theories of Hungarian-American Economist Zoltan Pozsar to explain that the dispatching of warships to safeguard cargo as it makes its way around the world is inevitable once attacks place serious financial strains on commodity futures.
Comparing how central banks step in when private/commercial banks cannot perform their part of a transaction, Pozsar argues that state militaries must step in when commodity traders are unable to deliver because of danger to their shipping vessels:
“Commodity traders can deliver foreign cargo from port A to port B most of the time, but when not, the state intervenes again: not the monetary arm, but the military arm of the state. What central banks are to the protection of par promises, the military branch is to the protection of shipments.”