US relists Houthis as terrorists amid fears of lengthy Red Sea disruption

WASHINGTON/DAVOS

The United States on Wednesday returned the Yemen-based Houthi rebels to a list of terrorist groups, while business chiefs warned that disruption to shipping in the Red Sea caused by their attacks could affect supply chains for months.

Attacks by the Iran-allied Houthi militia on ships in the region since November have slowed trade between Asia and Europe and alarmed major powers - an escalation of Israel's more than three-month-old war with Palestinian Hamas militants in Gaza.

The Houthis say they are acting in solidarity with Palestinians and have threatened to expand attacks to include U.S. ships in response to American and British strikes on their sites in Yemen.

U.S. officials said the "Specially Designated Global Terrorist" (SDGT) listing was aimed at cutting off funding and weapons the Houthis have used to attack or hijack ships.

A Houthi spokesman told Reuters that attacks on ships heading to Israel would continue and the designation would not affect its position.

Iranian Foreign Minister Hossein Amirabdollahian, whose country backs Hamas in its war with Israel, said an end to the war in Gaza was needed to remove the threat to shipping.

"The security of the Red Sea is tied to the developments in Gaza, and everyone will suffer if Israel's crimes in Gaza do not stop ... All the (resistance) fronts will remain active," Amirabdollahian said at the World Economic Forum in Davos.

US president Joe Biden delisted Houthis from the global terror list weeks after coming into office.

Shipping giant Maersk and other large shipping lines have instructed hundreds of commercial vessels to stay clear of the Red Sea, sending them on a longer route around Africa or pausing until the safety of vessels can be assured.

"It's one of the most important arteries of global trade and global supply chains and it's clogged up right now," Maersk CEO Vincent Clerc told Reuters Global Markets Forum in Davos, adding that disruption would probably last at least a few months.

Banking executives are worried the crisis might create inflationary pressures that could ultimately delay or reverse interest rate cuts.

Freight rates have more than doubled since early December, according to maritime consultancy Drewry's world container index, while insurance sources say war risk premiums for shipments through the Red Sea are also soaring.

The attacks target a route that accounts for about 15% of the world's shipping traffic and acts as a vital conduit between Europe and Asia. Japanese trading house Sumitomo Corp was the latest company caught up, saying it had some cargoes in the Red Sea that were affected by the situation.

The attacks are causing major disruption to Italian ports and fueling fears that a prolonged crisis may force companies to move traffic away from the Mediterranean more permanently.

Italy wants fellow European Union members to agree next week to create an EU maritime security mission so that it can become operational as soon as possible, Italian Foreign Minister Antonio Tajani said on Wednesday.

The alternative shipping route around South Africa's Cape of Good Hope can add 10-14 days to a journey when compared to a passage via the Red Sea to the Suez Canal.

Prolonged attacks by the Houthis on ships would lead to a shortage of tankers, the CEO of Saudi oil giant Aramco said.

"If it's in the short term, tankers might be available ... But if it's longer term, it might be a problem," CEO Amin Nasser said in an interview in Davos.