Ngozi Okonjo-Iweala, Director-General of the World Trade Organization. (Photo: AFP)

New disruptions by insurgents in the Red Sea, the Suez Canal, and the Panama Canal mean the WTO “is less optimistic”, the head of the international trade body said at the World Economic Forum (WEF) in Davos, Switzerland. Before the massive Hamas attack on Israel in October 2023 and the subsequent conflict in Gaza, the WTO had projected growth of 3.3% this year. But Okonjo-Iweala warned the figure for 2024 would now be lower in future forecasts.

A spate of attacks over the past month by Houthi forces on commercial ships in the Red Sea has disrupted the vital trade route that accounts for 12% of global trade, forcing shipping companies to halt their journeys through this area or to reroute their ships around the Cape of Good Hope past South Africa. This will increase transit times and costs.

Sharing the WTO’s concerns, Executive Director of the International Energy Agency (IEA), Fatih Birol said if the situation in the Red Sea does not improve, the impact could be even more severe.

“Currently, of course, there are some issues related to the transportation of oil, which has showed limited impact on prices. Production is not affected at all. But, if one or more than one major oil producing country is directly involved in the conflict, this may up the pressure on prices,” he said.

The recent drought at the Panama Canal in South America, its worst in decades, is also of great concern, causing a water supply shortage at the canal and forcing the Panama Canal Authority to reduce the number of ships passing through the canal each day by 36%.

This is not only a cause of Panama’s loss of an estimated 500-700 million USD this year, but also affects global trade overall.

The Panama Canal is one of the most important shipping routes in the world, connecting the Atlantic and Pacific Oceans while transporting 270 billion USD worth of commercial goods each year.