MUFG Warns “Higher Friction Geopolitics” Puts These Global Maritime Chokepoints At Risk

With the US Department of Transportation and one of the world’s largest shippers, Maersk, warning about prolonged turmoil across the Red Sea on Wednesday due to continued Red Sea attacks by Iran-backed Houthi rebels, global trade could seriously be affected. 

In a note to clients, the global corporate & investment banking capital markets strategy team at MUFG Bank provided a series of visualizations that show how rising geopolitical tension could jeopardize maritime chokepoints. 

Analysts led by Tom Joyce, managing director and capital market strategist at MUFG, showed how key events over the last five years, starting with the 2018 trade war to the 2020 Covid crisis to the 2022 Russia-Ukraine war, and so forth, are responsible for the chaos in trade and geopolitics today. 

Joyce’s top theme for markets this year is “Higher friction geopolitics.” 

The deteriorating geopolitical environment worldwide has analysts worried about critical maritime chokepoints:

Military conflict in the 21st Century is quickly shifting to maritime theaters. Climate, geopolitical risk and de – globalization will pose significant challenges to the world’s most important geopolitical chokepoints in the decade ahead.

Focusing on the Middle East, Joyce shows how 25% of global trade that flows through three chokepoints, Suez Canal, Bab-El Mandeb Strait, and Strait of Hormuz, is at serious risk of sparking global trade disruption. 

“As of early January 2024, the number of container ships at the entry point to the Red Sea had declined 90% from the year prior,” Joyce noted. 

The analysts elaborated on the trade significance of these three maritime chokepoints in the Middle East:

In a separate report, Rabobank’s Senior Economist Maartje Wijffelaars outlined how commercial vessels rerouted from the Red Sea to Cape of Good Hope will trigger a new round of surging cost-push inflation. 

And Statista’s Katharina Buchholz recently provided details about global shipping’s chokepoints. 

More of the MUFG full note available to pro subs in the usual place.