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An aerial view of the Galaxy Leader taken in 2018

A view of the British-owned and Japanese-operated cargo ship Galaxy Leader, which was reported to have been captured by Houthis in the southern Red Sea, in this handout image taken near Queensland, Australia November 27, 2018. Owen Foley/Handout via REUTERS

‘Galaxy Leader’ Capture Reignites Fears Over Mideast Shipping

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November 20, 2023

By Shoko Oda (Bloomberg) —

A Israeli-owned ship seized in the Red Sea by Iran-backed Houthi rebels in retaliation for the war in Gaza is raising fears over more widespread disruption in one of the world’s busiest shipping routes.

The Galaxy Leader, beneficially owned by a unit of Israeli businessman Rami Ungar’s Ray Shipping Group, was taken in the southern part of the Red Sea on Sunday. A spokesperson for the Houthis said Israeli ships would continue to be targeted until the military operation against Hamas ends.

Ships have often been caught up in the tensions between various groups in the Middle East, at times disrupting flows of energy and other goods. The Houthis have regularly claimed attacks in the Red Sea and the Gulf of Oman. They have also targeted sites in the United Arab Emirates and Saudi Arabia with drones and missiles — including in 2019 when they briefly knocked out half the kingdom’s oil production. 

Heightened Threat Level in Red Sea Prompts Concern

But the oil market on Monday shrugged off the latest seizure of the ship that’s used to transport vehicles as traders focused on a key OPEC meeting this weekend. Natural gas in Europe rose initially but gave up some of the gains. 

The Houthis said Sunday they had taken the vessel to the Yemeni coast. Tokyo-based Nippon Yusen KK, which had chartered the ship, said it was unaware of the current location of the vessel, which has a crew of 25 and is carrying no cargo.   

Iran denied any role in the seizure, with Foreign Ministry spokesman Nasser Kanaani saying resistance groups in the Middle East make and implement their own decisions based on their own interests.

Israeli Prime Minister Benjamin Netanyahu’s office condemned the action. 

While the impact of the Israel-Hamas war has been contained so far, markets have been wary that the fighting will draw in other nations in the region, particularly Iran. The action in the Red Sea represents a “significant escalation of tensions,” said Kenneth Loh, a Bloomberg Intelligence analyst covering shipping and logistics. 

“Some shipping companies may decide to circumvent the region for safety reasons, which means additional costs and delays,” he said. “This could lead to a knock-on effect across global supply chains reminiscent of pandemic-era congestion and supply-chain chaos.” 

Japanese trade minister Yasutoshi Nishimura said the Red Sea route is used for transporting diverse goods and issues there could affect the nation’s economy. He said while there isn’t an immediate impact, Japan is watching for any effect to supply chains and inflation with a sense of urgency.

The Japanese government is currently gathering information through related ministries and agencies, Chief Cabinet Secretary Hirokazu Matsuno said Monday. The country is engaging with the Israeli government as well as the Houthi group, Saudi Arabia, Oman and Iran to work toward the release of the vessel, he said. 

The vessel’s crew members are from Bulgaria, Ukraine, Romania, Mexico and the Philippines, according to a Nippon Yusen spokesperson. The ship had unloaded its cargoes at a port in Turkey and was headed to the Pipavav terminal on the coast of India, he said. 

Nippon Yusen has not yet decided on measures for other vessels that may pass through the Red Sea region, the spokesperson said.

The Houthis have been fighting a civil war in Yemen since 2014. A Saudi-led coalition intervened the following year on the side of the United Nations-recognized government and against the rebels. The conflict has calmed since a truce was agreed around 18 months ago. But the Israel-Hamas war has reignited tensions, with the Houthis saying they would back Hamas with attacks on Israeli territory and ships. 

© 2023 Bloomberg L.P.

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