The Red Sea situation has persisted for more than three months, disrupting the usual maritime route through the Suez Canal due to threats from Yemen's Houthi rebels. This has compelled merchant vessels to reroute around Africa's Cape of Good Hope, significantly impacting global trade. The redirection has caused delays in shipments arriving in Europe and the US and has led to a consistent rise in maritime freight costs. Specifically, shipping costs from India to these regions have surged by over $1,000 per container, and air freight rates have more than doubled.

Despite the challenges, some urgent deliveries are being airlifted, though at a higher cost due to limited capacity. The global trade, predominantly reliant on sea transport, is facing unprecedented strain, especially the Suez Canal route, which is vital for about 12% of worldwide trade, transporting a diverse range of goods.

In recent months, the Houthi rebels have intensified their attacks in the Bab el-Mandeb strait, further jeopardizing maritime traffic. This has gradually increased the pressure on the global supply chain, with inventories depleting rapidly in consumer markets. Indian suppliers, in particular, might soon face heightened demand pressures.

The diversion has added approximately 20 days to shipping times to Europe and the US. This ongoing delay could lead to increased demands from clients for timely deliveries. Some clients manage their logistics, potentially easing the immediate burden on suppliers, but they may seek cost reductions in the future. Conversely, suppliers responsible for covering shipping costs are under pressure to absorb these increased expenses without passing them on to their clients.

The United Nations Conference on Trade and Development (UNCTAD) reports a significant decrease in Suez Canal traffic and a drop in shipping activities. The industry has seen a sharp rise in spot freight rates, particularly from Shanghai, indicating a broader impact on global shipping costs.

Amid these challenges, there are discussions between Russia, China, and the Houthi rebels to negotiate passage through the Red Sea. Meanwhile, shipping companies, including Maersk, continue to avoid the region due to ongoing security concerns, opting for the longer African route until the situation stabilizes.