General Manager of RaboResearch, Stefan Vogel, appeared on the Country Viewpoint program this week to explain the details behind the latest developments in the Red Sea region.
Escalating tensions will almost inevitably present logistical nightmares for Australian trade with shipping companies facing the prospect of coming under siege by choosing to navigate the Suez Canal route.
"If you think about the global trade and Australia, clearly with all the ag products that we're shipping to the world, but also with the imports we're bringing in from fertilizers to chemicals to machinery parts, we're clearly very heavily depending on the shipping industry as well," Vogel said.
"So if I'm thinking these days about the Red Sea and all the attacks that we face there in the region on shipping companies, it clearly brings the shippers in the world to the point to make tough decisions, figuring out 'do I still take the risk and go through the canal and maybe be attacked in the Red Sea, or do I actually take the long way around Africa', which easily takes seven days on certain routes, maybe 15 days of extra travel time.
"If you do that, you're not only facing higher costs for yourself but it also means that the vessel is not readily available as quick as usual for the next load and you're reducing the capacity in the shipping industry, so if we're looking into all the exports that we're doing here in containers or all the imports we're bringing in that are containerised, we clearly have seen that since the early days of December up until the middle of January those indexes have already doubled for containers.
"The situation in the Red Sea is still getting rather tight and especially for all the exports, be it in grains, be it in containers like meat or fresh produce, we will have to think about how to handle that."
Perhaps most alarmingly, Vogel said he is unable to pinpoint a time where tensions may ease because he cannot see a solution to the problem due to various geopolitical roadblocks.
"Usually when you think about problems in kind of political areas you often think, 'oh, if this country does this, if this politician does that, we may find a solution', but we actually have a very complicated situation that the Americans are down there trying to protect the trade," Vogel said.
"The UK also does their job, let's see how many other countries will join in, but there's quite a bit of an imbalance between what it costs you to protect those vessels versus what it costs the Houthis, which are often backed by Iranian kind of drones and other material to do these attacks.
"So if you think about that, it's rather cheap for the Houthis to send a couple of drones - it is very expensive for the Americans and the UK and whoever else tries to intercept
those."