The new Suez crisis will boost inflation
The blockage of the Suez Canal has sent container shipping prices soaring and put global supply chains under unprecedented stress.

The grounding of the Ever Given container ship halted traffic on the Suez Canal for almost a week before the vessel was finally freed on Monday.
The blockage resulted in vast maritime tailbacks as hundreds of container ships waited to pass between the Mediterranean and the Red Sea, disrupting an estimated £7bn of trade in goods every day, according to shipping data from Lloyd’s List. Shipping line Maersk warned that knock-on congestion at ports could potentially take “months” to clear.
A crucial chokepoint
The Suez Canal carries about 12% of world trade. It reduces shipping times between Europe and Asia by almost two weeks (boats would otherwise have to go around the whole of Africa). An estimated 7% of the world’s oil passes through the canal, but oil markets remained calm during the blockage. Renewed virus restrictions in Europe and plentiful global oil stockpiles meant that shortages remained far from traders’ minds.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The Suez Canal is one of four major “chokepoints” for global shipping, says Deutsche Welle. The Strait of Hormuz, which separates Iran from the Arabian Peninsula, occupies a special place in the nightmares of oil traders: about a quarter of seaborne oil and one-third of liquefied natural gas pass through the narrow strait. The Panama Canal carries 5% of world trade; in Asia, 40% of global trade and 80% of Chinese oil imports pass through the Strait of Malacca . “At its narrowest point off Singapore” it is 1.7 miles wide.
Prices will rise
Global shipping was already “in chaos” before the Suez blockage, says Hanna Ziady for CNN Business. Covid-19 disruption, which has closed factories and tightened border controls, has put global supply chains under “unprecedented” stress. On the demand side, US seaborne imports are up by 30% in a year because of booming demand for “televisions, furniture and exercise bikes”.
The result is that container-shipping rates have soared, says the Financial Times. The cost of shipping a 40-ft container from east Asia to the US has risen from $1,500 in January 2020 to $4,000 today. Supply chains have held up during the pandemic; prolonged shortages have been rare. Yet the “New Suez crisis” is a reminder that our “just-in-time” logistics model prioritises efficiency over “resilience”.
Pricier shipping costs will eventually be passed on to consumers in the form of higher prices, says James Thomson in the Australian Financial Review. Ports from Los Angeles to Auckland to Chittagong in Bangladesh are already badly congested. A surge in demand for goods from locked-down consumers has manufacturers working flat out to keep up: the PMI gauge of eurozone manufacturing activity recorded its highest reading since 1977 in March. “It’s hard to see how this pressure doesn’t manifest [itself] in higher inflation.”
-
Trading terms: The Santa Rally
Glossary Will the Santa Rally result in its traditional December effect on global markets?
By Dr Matthew Partridge Published
-
Lock in high yields on savings, before they disappear
As interest rates peak, time to lock in high yields on your savings, while they are still available.
By Ruth Jackson-Kirby Published
-
Can Lidiane Jones be Bumble's perfect match?
Dating app Bumble is taking on Lidiane Jones, a well-regarded leader in tech, as its new boss. Can she work her magic in a new arena?
By Jane Lewis Published
-
UK millennials are worse off than previous generations
The evidence shows that millennials today are getting a raw deal. And, ultimately, that's a political choice.
By Simon Wilson Published
-
The rise and fall of Sam Bankman-Fried – the “boy wonder of crypto”
Why the fate of Sam Bankman-Fried reminds us to be wary of digital tokens and unregulated financial intermediaries.
By Jane Lewis Published
-
The jury's out on the AI summit at Bletchley Park
World governments gathered for an AI summit at Bletchley Park in November, but were they too focused on threats at the expense of economic benefits?
By Simon Wilson Published
-
As a market correction begins, money is on the move.
The force of a market correction is equal and opposite to the delusion that preceded it, so we can imagine that the correction will also be unparalleled.
By Bill Bonner Published
-
How small businesses can retain staff in a competitive job market
Small businesses are struggling to retain staff and compete against large companies with deep pockets.
By David Prosser Published
-
The French economy's Macron bubble is bursting
Cheap debt and a luxury boom have flattered the French economy. That streak of luck is running out.
By Matthew Lynn Published
-
K-pop hitman Bang Si-hyuk aims to repeat BTS phenomenon
Bang Si-hyuk created the world’s biggest boy band, BTS, making K-pop music a global sensation and himself very rich. Can he repeat the trick with a girl band?
By Jane Lewis Published