European Union’s economy commissioner, Paolo Gentiloni, has raised alarms about the escalating violence in the Red Sea, particularly the Houthi attacks on shipping, warning that it could lead to a surge in energy prices and inflation within the EU.
According to AFP, speaking at the commencement of a meeting with EU finance ministers, Gentiloni highlighted the geopolitical tensions and their potential to cast a shadow on the bloc’s economic outlook.
“While we are starting this year with subdued growth and some positive news on the labor market, there are increasing concerns about the downside risks caused by the geopolitical tensions,” Gentiloni stated.
He emphasised that the events in the Red Sea, although not immediately impacting energy prices and inflation, should be closely monitored as consequences might materialise in the coming weeks.
The heightened tensions in the Red Sea were triggered by recent strikes carried out by the United States and Britain on Houthi rebels in Yemen, responding to the rebels’ attacks on international shipping.
The Iran-backed Houthis, claiming solidarity with Gaza, have intensified missile and drone attacks on vessels they perceive as linked to Israel, a situation that has disrupted the key Red Sea trade route.
Approximately 12 percent of global trade typically transits through the Red Sea, but since mid-November, the attacks have forced many shipping companies to opt for longer routes around the tip of Africa. This disruption in supply chains has put upward pressure on inflation, causing ripple effects that Gentiloni believes warrant close attention.
