Choked Off: The Six Day War’s Impact on Maritime Trade
On June 5, 1967, Israeli jets launched the opening salvo of a short, but
consequential conflict that shut the Suez Canal for eight years.
Looking at how events unfolded
following the blockage of this key artery of world trade underscores
that geopolitical shocks can have unexpected and long-lasting effects.
As shipping has grown more complex, assessing multiple long-term
datasets like those Winton considers below can offer up valuable
information and potential investment opportunities. Today, the Suez
Canal remains a vital economic conduit. It handles a sizeable share of
Asia’s merchandise exports to Europe and the United States, particularly
since China has designated the waterway as a critical component in its
Maritime Silk Road Initiative, investing in container hub facilities
along its route.
Arterial Blockage
A week before the canal’s closure in 1967, Egypt had sealed the
Straits of Tiran to Israeli ships, prompting Israel to strike at
Egyptian airfields. This initiated the Six Day War, which brought the
Israeli Defence Force to the eastern bank of the Suez. President Nasser
of Egypt immediately closed the canal, planting mines and scuttling
vessels for good measure, hoping to force the international community to
intervene. But with Nasser unwilling to guarantee Israeli shipping
rights, Israeli soldiers stayed put and the canal remained closed for
eight years. The visual graphic below depicts how shipping routes
changed and adapted in the period following its shuttering:
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The closure arguably had a less dramatic short-term economic
effect than might have been supposed. The most instantaneous impact was
on shipping rates. Oil tankers, en route from the Arabian Gulf to
Europe, were forced to take the much longer route around Africa,
creating a surge in demand in the time-charter market that was not
immediately met by supply.
Cargo insurance premiums and operating costs also increased. As a
result, freight rates quadrupled – passed on to consumers as a
surcharge. The dry bulk carrier market also witnessed an upswell as
grain carriers were hastily converted to carry oil.
The most remarkable change was in fact long-term in nature. The Suez
Canal’s former status as the preeminent thoroughfare for crude was never
regained, despite the waterway’s geographical proximity to many of the
world’s largest oil-producing countries.
The 1967 Spike in Tanker Rates: One of Many
Source: Winton; Martin Stopford; Bloomberg
The 1956 Suez Crisis: A Wakeup Call
The price hikes that followed the Suez’s closure were painful, but it
could have been much worse. The experience of the 1956 Suez Crisis –
when the canal was closed for six months and severely disrupted Europe’s
oil supplies – had served as a wake-up call.....
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We originally published this post in 2019, but since then Winton has redesigned their website and all their Longer View articles are gone, meaning you get a 404 on the original link. Fortunately it was captured at the Internet Archive:
http://web.archive.org/web/20200524105042/https://www.winton.com/longer-view/the-six-day-wars-impact-on-trade
