Finance Ministry says Houthi attacks not substantially impacting trade to Israel, inflation

File - Members of the Iran-backed Houthis in Yemen march over Israeli and US flags painted on the street in Sanaa during a rally in support of Palestinians amid the ongoing war between Israel and the Hamas terror group in Gaza, February 28, 2024. (Mohammed Huwais/AFP)
File - Members of the Iran-backed Houthis in Yemen march over Israeli and US flags painted on the street in Sanaa during a rally in support of Palestinians amid the ongoing war between Israel and the Hamas terror group in Gaza, February 28, 2024. (Mohammed Huwais/AFP)

Attacks by Yemen’s Iran-backed Houthis on cargo ships in the Red Sea are having limited effect on trade to Israel and have not led to any significant inflationary pressures, the Finance Ministry says in a report.

The Houthis have repeatedly launched drones and missiles against international commercial shipping in the Gulf of Aden since mid-November, saying they are acting in solidarity with Palestinians in Gaza amid Israel’s war with Hamas.

Their Red Sea attacks have disrupted global shipping, forcing firms to re-route to longer and more expensive journeys around southern Africa, and stoked fears that the Israel-Hamas war could spread to destabilize the wider Middle East.

The Finance Ministry says that with the price of maritime transport up 163% globally, Israel could be affected through higher import costs or by supply chain disruptions and a rise in commodity and energy prices.

But it says the cost of sea transport is just 3 percent of the total value of imports. And with imports just 20% of private spending, the cost of sea transport is no more than 0.6% of private spending.

The ministry says that, in the most extreme case, the jump in sea freight costs would contribute up to a 1 percentage point increase in the consumer price index (CPI) in the coming year. At the same time, it says there have been no significant disruptions in the supply chain and commodity and energy prices have been largely stable.

As a result, “inflation expectations for the coming year also remained essentially unchanged,” the ministry says.

Inflation is at a more than two-year low of 2.6%.

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