When these passages are blocked, it dramatically affects the availability and price of goods in every corner of the world.
More than 90 percent of all goods traded – food, construction material, pharmaceuticals, you name it – are transported on water. Under normal circumstances, it is easily the safest and most cost-effective way to get a product from one place to another. But maritime trade is inherently vulnerable to natural chokepoints. When these passages are blocked – for whatever reason – it dramatically affects the availability and price of goods in every corner of the world.
The importance of the Suez Canal – in case anyone ever doubted it – was brought home in 2021 when a container ship known as Ever Given ran aground, blocking traffic for nearly a week and stranding many billions of dollars worth of goods. More recently, Yemen’s Houthi rebels last year threw their support behind Hamas after the Oct. 7 attack on Israel and have since intermittently fired rockets at commercial vessels in the Red Sea bound for the Bab al-Mandeb strait and the Suez Canal. The World Bank estimated that traffic through the two channels had been cut in half as of March 2024.
Many of the world’s leading oil producers export through the Strait of Hormuz, making it a critical passageway for the transportation of global hydrocarbons. Last year, nearly 21 million barrels of oil per day, or roughly 20 percent of global supply, sailed through the strait. Iran controls the northern rim of the strait, putting it in the best possible position to hold oil and gas supplies and prices hostage if it ever wanted to. The West’s general animosity toward Iran – and the possibility of spillover violence from the Israel-Hamas conflict – only adds to the uncertainty along this route.
China’s economy lives and dies by its ability to export goods cheaply to foreign markets. Hemmed in as it is by islands – many of which are loyal to the U.S.-led security alliance in the Western Pacific – China depends on the Strait of Malacca for its livelihood. Every year, some 60 percent of its total oil supply and more than 70 percent of its petroleum and liquified natural gas exports pass through these waters, cutting transit time by 40 to 90 hours compared to other routes. The strait itself opens up to the South China Sea, a hotspot of Chinese naval activity and military posturing meant solely to avail itself to other sea lanes. Naturally, this pits it against the United States, which regularly conducts freedom of navigation operations in the region.
The Panama Canal is as strategically important as it is economically vital. In connecting the Atlantic Ocean to the Pacific Ocean, it indirectly links the coasts of its primary supporter, the United States, and ensures the security of the Caribbean Sea. And unlike other chokepoints, the threat of conflict along the canal is low thanks to the understood support of the United States. The bigger problem for the Panama Canal is water shortages that have forced authorities to reduce transit. As the country enters its rainy season, efforts are now underway to build back capacity and increase vessel draft.
By Geopolitical Futures
