Could Red Sea attacks reignite supply chain chaos?

Shipping traffic through the Red Sea has "plummeted" as Houthi militants step up their attacks on vessels in the region.

American-led airstrikes have done little to deter the disruption and now the CEO of one of the biggest shipping companies in the world says the disruption will probably last at least a few months.

"So for us, this will mean longer transit times and probably disruptions of the supply chain for a few months at least — hopefully shorter, but it could also be longer because it's so unpredictable how this situation is actually developing," said Maersk CEO Vincent Clerc, speaking to the Reuters Global Markets Forum in Davos, Switzerland.

Well-armed and well-funded Houthi militants began attacking shipping vessels bound for Israel last fall. The militant group has deep financial and logistics ties with Iran.

In November, the group released a video of armed men using a helicopter to seize a Japanese cargo ship in the southern Red Sea.

That came just days after the Houthi organization, still in the midst of a years-long civil war for control of Yemen, issued a warning. "We will sink your ships," the Houthis wrote in Arabic, English, and Hebrew over the image of an Israeli commercial vessel in flames.

On Jan. 11, a U.S.-led effort to quell the disruption began launching air strikes against targets across Yemen. Since then, there have been nearly daily attacks on ships in the Red Sea.

Global shipping companies have since been avoiding the region, opting instead for longer, more expensive routes to deliver their cargo.

A German think tank called the Kiel Institute for the World Economy says the consequences of the Houthi attacks were almost immediately clear.

"The volume of containers transported there plummeted by more than half and is currently almost 70 per cent below the volume that would usually be expected," wrote Julian Hinz, an economist and assistant professor of international economics at Bielefeld University.

So far, the attacks have not led to widespread supply chain chaos.

"It's a considerable diversion, you know, adding at least 10 days and transit time," said Chris Hall, the President and CEO of the Shipping Federation of Canada.

The Red Sea volatility is a reminder of the fragility of the threads that tie together the global economy. Supply chains depend on open oceans and well-functioning ports moving goods seamlessly to ground transport.

Hall says any break along those chains can quickly resonate throughout the rest of the system.