Houthi Attacks Create Serious Risks for Trade

The escalating situation in the Red Sea, primarily driven by Houthi attacks on shipping, is adversely affecting global shipping routes and supply chains. The Houthis, an Iranian-backed militant group in Yemen, have intensified their assaults on vessels, in support of Hamas against Israel. This has prompted limited retaliatory strikes from the United States and the United Kingdom, aimed at curbing Houthi activities. However, given the Houthis' resilience and their recent targeting of American-owned ships, an escalation in US and UK military responses seems increasingly probable. The Houthis have explicitly stated that they now view American and British ships as legitimate targets and have vowed to retaliate against any further operations by the US and UK.
 

The impact of these tensions on maritime traffic is significant. According to Bloomberg, following US and UK strikes on January 12, the volume of vessels passing through the Bab el-Mandeb Strait has dropped to less than half the usual number. This reduction in maritime traffic, coupled with decisions by major oil companies like Shell and BP to suspend oil transportation through the strait, has led to a 3% increase in Brent oil prices. The disruption is also affecting consumer goods, as evidenced by companies like Maersk suspending their shipping operations in the region.
 

The future trajectory of global shipping and pricing will be heavily influenced by the nature and intensity of US and UK responses. While a ground intervention by these nations seems highly unlikely, an expansion of airstrikes targeting Houthi infrastructure is anticipated. If these strikes effectively weaken Houthi capabilities, normal shipping activities might resume in the medium term. Additionally, as Israel alters its approach in Gaza and withdraws troops, a decrease in Houthi attacks may follow.
 

Contact us if you are interested in more in-depth analysis of this or any other issue in this weeks newsletter. 

Survey Indicates Weak Growth for 2024 

The yearly survey by the World Economic Forum in preparation for the annual meeting in Davos shows that the majority of top economists believe the global economy faces subdued growth in 2024. Growth is unlikely to be high because of geopolitical issues, higher interest rates, and problems in technology. According to the survey, 56% of polled respondents expected economic conditions to weaken in 2024, though there would be high regional differences. The United States and China will likely have moderate growth while Europe will be anemic and South/East Asia will be stronger. Importantly, 70% thought that interest rates have peaked, but there are unlikely to be cuts in the medium term.  

Microsoft to Keep Data Locally in EU 

Microsoft has decided to keep data locally in the European Union rather than transfer it abroad, which is a major decision indicating the difficulty of cloud providers navigating the onerous and varying privacy regulations in different countries and regions. According to the new policy, all customer data from cloud services (Azure, Microsoft 365, Power Platform) will remain within the “EU data boundary.” This is taking place despite the 2023 agreement between the United States and European Union on data transfers, and it is a strong indicator that more cloud providers will move towards data localization, increasing the prospect the balkanization of technology even amongst allies.  

2024 Trends in Executive Protection 

EP Wired has issued their executive protection trends of 2024 that will impact both the industry and clients. Trends in the world and industry are causing a shift in the landscape, and they will require new strategies by agents and organizations. In their description, the major trends for this year will include the use of biometrics and AI in security, geopolitical threats leading to significant instability, emerging technologies, machine learning, and increasing Internet of Things. Insight Forward regularly discusses geopolitical and technological issues impacting businesses, and this report highlights how those same issues also impact the business of security.  

Tensions Increase Between China and Philippines 

Tensions between the Philippines and China are likely to increase over the medium term as shifts in foreign policy and defense positions indicate that President Marcos is moving away from China. In diplomatic incident, President Marcos congratulated Taiwan's president-elect Lai Ching-te on his election victory, leading China to summon the ambassador from the Philippines and warned the country “not to play with fire” because the CCP was "strongly dissatisfied with and resolutely opposes these remarks.” The Philippines has also taken the important step in bolstering its position in the South China Sea by developing islands to make them livable for troops to be stationed there. Both actions are indicators that President Marcos will take the Philippines in a different direction concerning China. This will increase tensions between the two countries with a moderate likelihood of punitive actions by China, which would most likely take the form of trade barriers.

China Negotiates Ceasefire in Myanmar 

China is facing problems in its immediate region due to Myanmar’s civil war and faces concerns in its strategic trade corridor. In mid-January, China was able to broker a ceasefire between Myanmar’s military junta and the major rebel alliance despite militant attacks on the Port of Kyaukphyu the week before the agreement. This ceasefire is likely brittle and unlikely to last. However, Myanmar’s civil war is impacting China’s borders because of violent spillover, but China is more interested in protected its Indian Ocean supply lines, especially keeping access to the US-controlled Strait of Malacca.  

Russia Reaches Agreement with Niger 

Niger’s military council that took control of the country following the coup has allegedly entered a partnership with Russia on issues of defense, agriculture, and energy. This is another indicator that the West is losing important influence in Central Africa as the United States and Europe compete with Russia and China for access to resources, building military bases, and security concerns. Niger already removed French troops and ended security pacts with the European Union, and this agreement will give Russia a stronger foothold in the region. The country is important for uranium and oil, but it is also pivotal in its role in fighting Islamist terrorists in the Sahel.  

Europe’s Political Divisions Changing 

Political divisions in Europe are likely shifting as the primary dividing issues cannot be neatly divided into left and right, according to a new survey the European Council on Foreign Relations. The survey found that five major crises in the past decade will dominate political divisions and impact the 20 elections across the continent this year. These issue are the climate emergency, the 2015 migration crisis, global economic turmoil, the war in Ukraine, and Covid. For example, the Dutch parliamentary vote in November 2023 had Geert Wilders’ anti-immigrant Freedom party (PVV) in first place and the pro-environment Green-Labour alliance in second place. If the report is accurate, then analysts assessing European elections will need to understand how these variables relate and are salient to the relevant voters.