The Atlantic Council has delved into the critical importance of the Suez Canal as a vital artery of global trade in order to point out the need for enhanced security measures to ensure the waterway’s smooth operation.
As explained, Given its strategic role as the fastest sea route between Asia and Europe, any disruption to the Suez Canal can have outsized impacts on global commerce and energy markets, which have occurred in recent years. Minimizing such disruption is an international concern. The Suez Canal is both a maritime choke point and a vital waterway for global trade and energy security. The 193-kilometer canal connecting the Red Sea and the Mediterranean:
- Attracts about 12 percent to 15 percent of worldwide trade and about 30 percent of global container traffic—with more than $1 trillion in goods transiting annually.
- Includes roughly 9 percent of global seaborne oil flows (about 9.2 million barrels per day in early 2023) and around 8 percent of liquefied natural gas (LNG) volumes.
- Averages fifty to sixty ships transiting the canal daily, carrying an estimated $3 billion to $9 billion in cargo value.
- Generates toll revenue—a major economic lifeline for Egypt—with a record of $9.4 billion set in 2022–2023.
It requires diplomacy and collaboration to bolster Suez area security and capacity building to protect trade flows and supply chains, reduce shipping and insurance costs, and foster a stable supply of energy.
The extended economic impact of incidents in the Suez Canal
| Event | Period | Key Economic Impacts |
|---|---|---|
| Suez Crisis | 1956-1957 |
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| Arab-Israeli wars | 1967–1975 |
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| Iran-Iraq War | 1980–1988 |
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| Somali piracy | 2005–2012 |
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| Ever Given blockage | 2021 |
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Impact on global trade and economy
The disruptions arising from conflict around the Suez Canal have had immediate and far-reaching economic effects, including on trade flows and supply chains. Vessel attacks and rerouting in the Red Sea effectively throttled Suez traffic in late 2023 and early 2024. In fact, the volume of trade passing through the Suez Canal dropped by about 50 percent in the first two months of 2024 compared with a year earlier.
Dozens of ships that would normally use the canal instead took the long way around Africa, causing the volume of goods shipped via the Cape of Good Hope to surge by about 74 percent as shippers improvised alternate paths. This detour adds roughly ten or more days to Asia-Europe voyages on average, straining just-in-time supply chains.
Companies that rely on fast turnarounds—from electronics manufacturers to retail suppliers—suddenly needed to cope with extended transit times and uncertain delivery schedules.
By January 2024, port call data showed ripple effects: Weekly ship transits through the Bab al-Mandab Strait, for example, plunged to roughly nineteen per day, down from a normal level of seventy or more in prior months. Such a sharp decline in Red Sea traffic implies a significant temporary loss of global shipping capacity, as a large share of the world’s container and bulk fleet was pushed onto longer routes.
Rising shipping costs and capacity challenges
One immediate consequence of these longer routes and convoy delays was a spike in transportation costs. Industry analysts estimated that the effective global shipping capacity shrank by about 20 percent during the crisis (as ships spent far longer in transit). This capacity crunch drove up freight rates on major trade lanes.
Container spot rates for Asia-Europe routes, which are heavily dependent on Suez, began rising as carriers needed to deploy more vessels to maintain schedules and as available space tightened. Rerouted ships also experienced congestion in alternate ports (e.g., in South Africa and Southeast Asia) as traffic patterns shifted. All these factors increased operating costs for carriers, which were passed on to shippers–and ultimately to consumers.
Studies by the International Monetary Fund have noted that if such disruptions persist, they can put upward pressure on inflation in affected economies due to costlier imports and shipping delays. European importers, for instance, faced both longer lead times and surcharges on freight in late 2023, complicating inventory management and production schedules.
Rising insurance costs amid security concerns
The security situation also led to soaring marine insurance costs for voyages via the Red Sea and Suez. Insurers designated much of the Red Sea as a high-risk war zone, imposing additional premiums on hull and cargo coverage. War-risk insurance premiums—which had previously been a nominal 0.05-0.1 percent of a vessel’s value—surged to as high as 1-2 percent of ship value per transit in late 2023.
Likewise, cargo insurance rates for shipments through the region spiked. Policies that typically cost about 0.6 percent of cargo value climbed to roughly 2 percent in the aftermath of the attacks. These hikes meant that a large container ship (or its cargo) faced millions of dollars in extra insurance costs for a single Suez passage. Such expenses made the Suez route financially unviable for many vessels at the height of the conflict—further incentivizing detours around Africa despite the longer journey.
Even as of early 2024, some insurers remained reluctant to cover Red Sea transits at all, requiring shippers to seek specialized coverage or government guarantees. The net effect was sharply increased operating costs for any ships brave enough to continue through the canal during the hostilities, adding to the economic toll.
Energy market impacts and disruptions to oil and gas flows
Geopolitical strife affecting the Suez area also reverberates through energy markets and influences trade patterns. The canal and its associated pipelines (like Sumed) are key conduits for Middle Eastern oil and LNG exports to Europe. Disruptions here can contribute to oil price volatility: For example, news of the Red Sea attacks in late 2023 helped push Brent crude oil prices up as markets priced in potential supply delays.
During the recent conflict, southbound oil transit through the Suez fell by half, from about 7.9 million barrels per day (bpd) in 2023 to only about 3.9 million bpd in 2024, as many tankers rerouted or deferred voyages. Some mitigation came from rebalancing flows. Notably, Russia shifted large volumes of crude to Asia via the Suez Canal (after the European Union imposed sanctions), which kept certain Suez oil traffic robust despite the turmoil. However, other petroleum streams were heavily disrupted. Virtually all jet fuel shipments to Europe stopped using the Suez route once the attacks began (only about 2 percent of global seaborne jet fuel now transits the canal).
Instead, tankers opted to go around the cape or use alternative pipelines. These shifts illustrate a broader point: extended conflicts can trigger higher risk for an extended period. Certain cargoes might not immediately return to the Suez route even after tensions ease, especially if insurers and shippers perceive lingering risks.
Environmental impact of shipping detours
Additionally, the mass diversion of ships around Africa has an environmental cost—longer voyages mean higher fuel burn and emissions. It’s estimated that rerouted ships traveling 50-60 percent farther produced roughly 40 percent more carbon dioxide emissions per voyage than traveling via the Suez Canal, highlighting a climate impact alongside economic costs.
Conclusion and outlook
Ensuring canal security
The recent disruptions underscore that the Suez Canal’s strategic vulnerability is an international concern. Stability in the waterways connecting to the canal (e.g., the Red Sea, Bab el-Mandeb, and the Eastern Mediterranean) is critical for uninterrupted commerce.
A key policy lesson is the importance of proactive security and diplomatic measures to protect this choke point. Egypt already maintains a robust military presence to secure the canal itself, but the Red Sea attacks revealed the need for a broader cooperative security framework—potentially involving regional states and global naval powers—to ensure safe passage in surrounding seas. Going forward, multinational maritime patrols or convoy arrangements in the Red Sea could be considered during periods of high risk (such as past anti-piracy operations or the tanker convoys in the Persian Gulf during the 1980s).
Enhanced intelligence sharing and early-warning systems could help merchant fleets avoid danger. Diplomatically, addressing the root conflicts is paramount: a temporary ceasefire in the Israel-Palestine arena helped directly reduce attacks on shipping. International mediation in Yemen and dialogues with Iran are likewise crucial to prevent future flare-ups that threaten Suez traffic. Policy coordination, whether through the United Nations International Maritime Organization (IMO) or coalitions of concerned nations, will be needed to bolster the security of global shipping lanes in this region.
Treaties and agreements, such as the UN Convention on the Law of the Sea (UNCLOS), provide a legal foundation for international collaboration in maritime security efforts. By adhering to these frameworks, countries can formulate joint strategies, share best practices, and coordinate response mechanisms to maritime insecurity.
Examples of key collaborative maritime security initiatives
| Initiative | Description |
|---|---|
| Combined Maritime Forces (CMF) | Founded in 2001, the CMF is a multinational naval partnership aimed at promoting maritime security in the Gulf of Aden, the Arabian Sea, and the wider Indian Ocean region. Comprising more than thirty member nations, the CMF conducts operations to deter piracy, protect shipping lanes, and ensure maritime trade security. This collaborative approach has significantly reduced piracy incidents off the coast of Somalia, illustrating the effectiveness of pooled naval capabilities. |
| Operation Atalanta | The European Union launched Operation Atalanta in 2008 to combat piracy in the waters off the Horn of Africa. This mission involves deploying naval vessels from multiple European nations to protect shipping lanes, provide humanitarian aid, and support capacity-building efforts in regional maritime forces. By working collaboratively, participating countries have been able to enhance the security of vessels transiting high-risk areas, thus restoring confidence in maritime operations. |
| Djibouti Code of Conduct | This regional agreement, initiated under the auspices of the IMO, aims to enhance cooperation among countries in the western Indian Ocean to combat piracy and armed robbery at sea. It encourages information sharing, capacity building, and collaboration in addressing security threats, effectively fostering a cooperative approach among countries to safeguard maritime trade in the region. |
Other maritime routes are emerging, but they remain insufficient. Climate change is gradually opening the Northern Sea Route (NSR) along the Russian Arctic, which raises the prospect of an Asia-Europe sea route that circumvents the Suez Canal. However, Arctic routes are not yet commercially viable for mainstream shipping: seasonal ice, specialized vessel needs, and a lack of infrastructure pose significant challenges. In the foreseeable future, the NSR will remain a limited-use route for specific ships and seasons, rather than a full alternative to the Suez Canal.
Meanwhile, the Cape of Good Hope route will continue to be the primary backup when the Suez is impassable, despite its longer distance. This reality was underscored during the Red Sea crisis. When faced with danger, the shipping industry’s only immediate large-scale alternative was essentially to go around Africa. While effective as a stopgap, that solution carries significant economic, logistical, and environmental costs, reinforcing why maintaining the Suez’s accessibility is so crucial.
Strengthening the canal’s infrastructure resilience
There is a policy impetus to build infrastructure resilience into existing trade corridors. The Suez Canal itself has undergone upgrades: For example, the 2015 expansion created a second channel section to allow two-way traffic and reduce transit time. Further investments by Egypt aim to increase the canal’s capacity and enable it to handle even larger vessels. Additionally, ports and logistics hubs on alternative routes are being enhanced to handle diverted traffic during emergencies. Such investments, often with support from development banks, seek to alleviate bottlenecks when trade shifts unexpectedly due to conflict or crisis.
Investment in technological solutions, training, and capacity building
International cooperation in maritime security can also extend to technological advancements. Countries can work together to develop and deploy surveillance systems, maritime domain-awareness tools, and advanced communication networks to monitor shipping activities effectively. For example, the Automatic Identification System (AIS) allows vessels to broadcast their location in real time, helping authorities to track maritime traffic and respond to security threats proactively. Joint investments in such technologies can enhance situational awareness and risk assessment, ensuring swift and effective responses to potential emergencies.
Investment in international training programs for naval forces and coast guards can further bolster maritime security. Collaborative efforts such as joint exercises, workshops, and exchange programs can equip personnel with the skills and knowledge needed to respond effectively to maritime challenges. For instance, the US Navy’s Partnership for Peace Program promotes military-to-military cooperation and training among countries, enhancing their ability to manage maritime responsibilities and contingencies. This collaborative effort can be further developed.
Policymakers and industry leaders will need to collaboratively safeguard the Suez Canal’s continuity, through security cooperation and contingency planning, to ensure that geopolitical conflicts do not again choke off one of the world’s most important trade arteries. The recent disruptions serve as a call to action to reinforce the resilience of global supply chains against such shocks.
