Middle East war could change sea traffic patterns around Cape Town

Global shipping companies are avoiding the Persian Gulf in light of the latest conflict between the US-Israel alliance and Iran.

The rising tensions could change sea traffic patterns, including in South Africa.

Andrew Pike, head of ports, rail and logistics at Bowmans, says it's still too early to tell whether the current situation is pushing traffic around the Cape, but adds that in time it likely will.

"There are two choke points. The Strait of Hormuz, largely for the oil exports from Saudi Arabia, Kuwait, Bahrain and those areas, is causing its own issue in terms of oil flow."

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In terms of the transit route, Pike says it's through the Suez, usually through the Red Sea.

"And the Houtis have, in response to this crisis, threatened to step up their own activity."

Since 2023, the Iran-backed Houthis have been carrying out maritime attacks, claiming they were in solidarity with Palestinians impacted by Israel's attack on Gaza.

Pike says the group's activities had waned in recent months but could now resume in light of recent events in the Middle East.

The biggest issue is that ships have to carry war risk insurance, says Pike.

"In other words, insurance against the risk of war and being hit by a stray missile."

Pike says insurers globally have begun cancelling war risk policies for ships in affected areas.

"So it forces them to come around the Cape."

Moreover, shipping firms that move through Suez and the Red Sea will be forced to self-insure and impose their own war risk surcharges.

'It's quite a significant impact on logistics costs, but what's the choice? You're going to lose your ship if you go that route," says Pike.

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The additional costs of transiting through the Cape can be up to 30%, he says, but notes that ships choosing to avoid the Suez Canal will also save on the Suez transit fee.

"You're going to start seeing more MSC ships, more Maersk ships, more Hapag-Lloyd and all the big names you'd expect coming around the Cape."

To listen to Pike in conversation with CapeTalk's Lester Kiewit, use the audio player below: