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.”
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
-
IMF suggests “refinements” to Rachel Reeves’s fiscal rules
The IMF has upgraded the UK’s growth forecast but wants Reeves to refine her fiscal rules to avoid unnecessary spending cuts or tax rises
-
Invest like a tortoise, not a hare to avoid market volatility
Opinion Hassan Raza, Portfolio Manager at CG Asset Management, highlights three favourite investment companies
-
What will the unravelling of US-China trade mean for the economy?
What will a US-China decoupling mean for the global economy?
-
What's next for Liberal Mark Carney after Canadian election win
Mark Carney will remain as Canadian prime minister after winning the country's election, despite falling short of a majority.
-
Could Javier Milei bring Argentina's economy back to 'normal'?
Javier Milei, president of Argentina, has been in office for more than 500 days. What will his leadership mean for the economy?
-
'Rachel Reeves' plan to force pension funds into UK assets won't work'
Opinion Hustling pension fund cash into British assets sounds like a good idea. It would be better to make Britain an attractive place to invest, says Matthew Lynn
-
Out of America's shadow: Why Trump's tariff chaos may be good for non-US stocks
Opinion Upending global investment and trade could benefit other countries at the expense of the US market, says Cris Sholto Heaton
-
Supersonic travel: How China could 'leapfrog' US and Europe's commercial aviation industry
Opinion Innovation in commercial aviation has been stuck for 60 years. A commercial supersonic jet might be back on the market soon, but will China get there first?
-
How British businesses can tackle Trump's tariffs
The majority of British businesses are likely to take a hit from the chaos caused by Trump’s tariffs to reorder global trade. Companies in the firing line face some difficult decisions, says David Prosser
-
Trump wants to colonise Mars – will it happen?
Donald Trump wants to plant the US flag on Mars. Could humans really live there?