Fears of prolonged Red Sea shipping crisis fuel inflation fears, as oil, retail cargo delays rise
A screen grab captured from a video shows that cargo ship ‘Galaxy Leader’, co-owned by an Israeli company, being hijacked by Iran-backed Houthis from Yemen in the Red Sea on November 20, 2023. (Photo by Houthis Media Center / Handout /Anadolu via Getty Images)
Anadolu | Anadolu | Getty Images
The ripple effects of the Red Sea diversions have expanded into the energy markets and despite repeated attacks on Houthi rebels by the U.S. and allies, shipping experts say the crisis may linger for months and lead to a cargo container supply crunch.
“So far, it almost seems the Houthi attacks are just increasing,” said Bendik Folden Nyttingnes, a shipping analyst at Clarksons Securities.
In an email to clients, Honour Lane Shipping (HLS) said its carrier contacts are “informally” predicting the Red Sea situation will not be solved for at least six months, and could last up to a year. “If so, we expect the soaring freight rates and equipment shortage will continue till the third quarter,” it advised clients.
Earlier this week, Shell confirmed that its oil tankers are temporarily being rerouted around the Red Sea, with its CEO telling the Wall Street Journal that a 5-10% price impact is anticipated in the short-term.
Kpler’s ship tracking director Jean-Charles Gordon estimates that vessels managed or chartered by Shell that are being rerouted via the Cape of Good Hope can expect an approximate 10-day delay in their estimated time of arrival.
“As several product tanker operators are avoiding the area following the airstrikes on Friday, the longer transit times around the Cape of Good Hope could create a supply shortage of tonnage if the situation continues, which in line could push product tanker rates and stocks higher,” Nyttingnes said.
Torm , Hafnia, Stena Bulk, Hafnia, BP, Frontline, Equinor, Euronav are reportedly among the tanker operators and energy companies choosing to avoid the area following recent warnings. Companies including Tom, Hafnia, Scorpio Tankers and Ardmore would benefit if product tanker rates rose, Nyttingnes said.
These diversions are immediately eating into Egypt’s economy, with its GDP reliant on the Suez Canal, which it owns and operates. The country’s other significant source of revenue, travel, has been decimated because of the Israel-Hamas War.
“If Total Suez Canal tanker transits are over 8 million barrels per day, the losses to the Canal Authority are probably in the range of $5 to $7 million depending on the mix of tankers going through,” said Andy Lipow, president of Lipow Oil Associates.
This would be on top of the revenue lost by diverted container vessels which are required to pay between $500,000-$600,000 per transit. According to Kuehn + Nagel, 90% of container ship traffic bound for the Suez Canal has been rerouted.
50% of all Suez traffic could be rerouted
A drop of 40-50% in all vessel Suez crossings as a result of shipping diversions is possible, according to Ami Daniel, co-founder & CEO of Windward, which could create a situation similar to the Covid supply chain crunch for many retailers reliant on global supply chains.
Logistics CEOs have been warning CNBC that the vessel re-routings would result in container crunches. When vessels are late, the containers on those vessels will be late to be processed and reused again for exports.
Goetz Alebrand, head of ocean freight Americas for DHL Global Forwarding, has been warning about an upcoming container crunch for weeks. “More than 4 million containers (Twenty-Foot Equivalent Units) are bound for longer transit times and will not be ready in the Asia Pacific for the next loading,” he warned. “Considering a two-week delay in either direction it could mean that four million times of containers will be needed to have availability.”
The Asia to Europe route is the most impacted by delays. The ripple effect of this bleeds into the ability of European exports to move out at a fluid rate.
“Europe has felt the most impact from the situation in the Red Sea given it is the major trade route for goods coming from Asia,” said Stephen Schwarz, executive vice president of Wells Fargo global receivables and trade finance. “However, with more ships being diverted and taking alternative, longer routes to Europe, it is starting to impact global capacity. The delay of containers, reduced capacity, and longer transit times all influence global shipping costs which will start to impact U.S. companies the longer the situation in the Red Sea continues.”
Paolo Montrone, global head of trade for Kuehn + Nagel, said the container crunch situation currently unfolding will have a knock-on effect on European exports.
“We anticipate encountering challenges in European terminals as larger ships are expected to arrive outside of their scheduled times. This influx is likely to cause congestion and slowdowns at terminals and ports, subsequently affecting other services such as shipments from Europe to the USA.”
Companies with higher-value items and time-sensitive products are also shifting to the air. “Drawing from past experiences, we foresee an increase in the need for air freight services in the upcoming weeks,” said Montrone.
Alan Baer, CEO of OL USA, said he is expecting the container crunch to impact Asia as well.
“Recently carriers reduced the amount of free time on import containers to help expedite the return of equipment back to Asia,” said Baer. “However, given the longer transit times vessels are experiencing, the market may face a shortage of empties across Asia until sailings normalize.”
U.S. retailers say they are prepared
The delays of vessels during the pandemic had some retailers like Home Depot, Costco, and Walmart hiring charters to speed up deliveries.
Evelyn Fornes, Home Depot spokeswoman, said it is working with logistics carriers to find alternate routes to limit any impact from the Red Sea conflict.
“As a regular course of business, we always have plans in place for potential disruptions to any of our partners,” Fornes wrote in an email. “We have a large and diverse supply chain with a number of partners, so we’re accustomed to being flexible and agile when there are disruptions. This type of flexibility is what allowed us to adapt and move the unprecedented volumes during the pandemic, despite significant disruptions.”
“Target remains confident in our ability to get guests the products they want and need,” a Target spokesman said via email. “We leverage production and transportation partners across the globe, and the majority of our freight does not travel through the Suez Canal. For any freight that’s being routed around the Suez Canal, we’re working with shipping partners on alternative paths.”
While retailers are expressing confidence, Tesla, Volvo, and Michelin have recently said they have had to halt manufacturing. Ikea has warned of delays of product, as well as British retailer Next and Crocs.
Costco and Walmart did not respond to requests for comment.
East Coast freight rates soar
While freight rates for U.S. West Coast ports have yet to spike, freight rates for the East Coast and Gulf are up. U.S. East Coast rates are between $5,900-$6,700 for a forty-foot container, and rates for the Gulf are between $6,300-$6,900 a 40-foot container, according to Honour Lane.
To avoid delays and fees, some logistics companies are re-routing to the U.S. West Coast, which could result in higher rates eventually.
“U.S. West Coast space is also getting tight as a substantial number of boxes destined for U.S. East Coast /Gulf destinations are being re-routed through U.S. West Coast hubs,” wrote HLS. “Some big beneficial cargo owners like Walmart have proposed to increase their allocation to the U.S. West Coast and reduce allocation to U.S. East Coast.”
The rates for East Coast and Gulf Coast containers are expected to go up even more. In an advisory to clients Tuesday, MSC alerted of both general rate increases and peak season increases starting February 12 for import containers from the Middle East/Indian Sub-Continent to U.S. East Coast, Gulf Coast and San Juan.
Refrigerated containers called “Reefers” and dry containers, both 20-foot and 40-foot, will be charged a $2,200 peak season charge per container plus a $1,000 general rate increase (GRI) per container. This is on top of whatever container fee the shipper pays.
Some carriers are reportedly planning to deploy more capacity to West Coast for the next contract year, HLS says.
“As the rate difference and transit time difference between U.S. East Coast routings and U.S. West Coast routings are both increasing, the conditions are satisfied for carriers to launch premium services to guarantee space and equipment, which is not strange to us.”
The Port of Los Angeles announced on Tuesday, a total of 747,335 containers were processed in December. This marked the fifth consecutive month of year-over-year growth of the port. Even with its 2023 year handling of 8,634,497 Twenty-Foot Equivalent Units, it was around 13% less than in 2022.
The new T-Roc has finally arrived, bringing some major upgrades. Volkswagen’s best-selling SUV will be available as a hybrid electric vehicle (HEV) for the first time, but there’s more under the hood.
Volkswagen’s best-selling SUV goes hybrid: 2026 T-Roc
Since launching the T-Roc in 2017, VW’s crossover SUV has attracted over two million buyers. Nearly 300,000 drivers in Europe opted for the compact all-rounder last year alone.
Although it’s already Volkswagen’s best-selling SUV, the second-generation T-Roc is an improvement in nearly every way possible.
Volkswagen unveiled the new T-Roc for the first time on Wednesday, showcasing a sleek new design, a revamped interior, and a unique new hybrid powertrain.
The new model retains the classic T-Roc DNA, with its coupe-like silhouette, but Volkswagen has added several new elements to help it stand out from the crowd.
One of the first things you’ll notice is the updated front-end design, similar to VW’s other updated vehicles, featuring all-new LED headlights. The rear receives an added full-length LED light bar with an illuminated Volkswagen logo.
The interior has been “significantly improved,” according to VW. It pulls several features from the larger Tiguan and Tayron models, including driving controls and various profile options.
A newly added feature, which VW claims is also first in its class, is an optional head-up display (HUD) that displays your driving speed, navigation, and more directly on the windshield ahead of you.
The new T-Roc is slightly longer, gaining an additional 12 cm in length compared to its predecessor. At 4,373 mm in length, the 2026 T-Roc is about the size of the Toyota C-HR and Kia Niro. It also boasts 30% more rear cargo space than its predecessor, with up to 475 liters.
Following the updated Tiguan and Tayron, the new T-Roc is the third VW SUV based on its MQB Evo architecture. For the first time, the T-Roc will be equipped with advanced safety systems, including Park Assist Pro.
The new T-Roc will initially be available with two 1.5 L turbocharged mild hybrid powertrains, followed by two full hybrid drive systems. The HEV models will debut on Volkswagen’s advanced new hybrid platform, which will utilize a small electric motor and a gas engine, similar to what Toyota uses.
Pre-orders for the new T-Roc will open in Germany on August 28 with an official market launch scheduled for November. Prices start at 30,845 euros ($35,500) for the 1.5 eTSI base model.
Volkswagen is keeping most details of its new hybrid system secret for now. However, a VW engineer told Autocar it will offer “more than a few metres” of electric range.
CEO Thomas Schäfer added, “The platform can do it all. We can introduce it as we like.” The Golf, Passat, Tiguan, and Tayron are available with PHEVs or mild hybrids. Now, the T-Roc will be offered as an HEV. When will we see the all-electric models? Likely closer to the end of the decade, as Volkswagen plans to use hybrids as a bridge to EVs.
How do you feel about the new T-Roc? Do you like the updated style? I have to say, I’m a fan.
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Environment
Google might lose its $26 billion search deals. Analysts say that could fuel its AI growth
Any day now, a federal judge is expected to issue a landmark ruling that could upend some of the most lucrative deals in Silicon Valley: Google’s default search contracts.
At stake is more than $26 billion a year, $20 billion of which goes to Apple. That’s nearly a quarter of Alphabet’s operating income.
For decades, the Apple-Google pact has helped determine who controls the internet, which is exactly why it’s now in the crosshairs.
U.S. District Judge Amit Mehta ruled last year that Google held a monopoly in search and ads. He’s been weighing remedies since the final phase of the trial wrapped in May, with a separate case on Google’s ad business set to begin next month under a different judge.
While Google risks losing some search traffic and predictability, analysts say Apple could take a bigger financial hit. The impact will hinge on whether Apple lines up new deals and how broadly the ruling applies.
Jefferies analysts say the judge may block exclusive contracts but still allow some payments. Even so, Apple’s pre-tax profits could drop by as much as 7%.
Some economists and Wall Street analysts believe Google might come out ahead in the long run — freed from costly deals that no longer drive demand.
Searching for competition
Barclays analysts said in an August 5 note that if Google were to unwind the payments and contracts, it would still be “nearly impossible” for smaller peers to compete.
Megacap rival Microsoft has poured $100 billion into Bing and hasn’t been able to catch Google’s Chrome.
Apple Senior Vice President of Services Eddy Cue testified during the antitrust trial that no price Microsoft could offer would be enough to justify switching to Bing, because Google delivered stronger results and a better monetization engine.
“I don’t believe there’s a price in the world that Microsoft could offer us. They offered to give us Bing for free. They could give us the whole company,” Cue said.
Apple executives contend that it’s easy for users to switch search engines. Currently, Apple allows Americans to switch to Yahoo, Bing, DuckDuckGo, or Ecosia as their default search engine, but few do.
“I think their search engine is the best,” Apple CEO Tim Cook said about Google in 2018.
Economist Lones Smith, who modeled how people decide which search engine to use, described the phenomenon as a natural monopoly, where scale breeds quality, and quality reinforces scale.
“I don’t understand this deal it has with Apple, because if they didn’t pay Apple $20 billion, do they think that people would really be using another search engine? I don’t see that,” Smith told CNBC.
Smith likened Google to a utility: Breaking it up makes little economic sense.
“How do we get our water, electrical, and all that? We have a regulated monopoly. We don’t go and break it up,” he said. “We understand that there’s an efficient outcome for society, and we just don’t want the water company to be exploiting us.”
From a pure economics perspective, some on Wall Street would argue that the payments look like unnecessary insurance and that Google’s dominance is sticky enough without them.
Data suggests users opt for Google even when there is a choice.
In Europe, where regulators forced users to pick their own default after a European Commission ruling against Google, the company’s market share barely budged, with StatCounter data showing it still hovers around 90%.
Dan Niles, founder of Niles Investment Management, told CNBC that while Europe proves Google can thrive without these payments, the U.S. market moves faster, and what’s next matters more than what’s lost.
“Google to me, quite honestly, once this is done … next year, if they continue down this path, it could be one of the best-performing stocks out there,” Niles said.
Even Google’s proposed remedy points in that direction, allowing shorter default contracts and multiple providers instead of blanket exclusivity, while warning that the bigger risk comes from the DOJ’s push for search data-sharing.
The decision
Former FTC Chair William Kovacic told CNBC that the Justice Department is essentially betting that limiting Google’s exclusivity deals will open the door for new competitors to emerge.
“In part, it’s an act of faith,” he said, though past cases have shown that once barriers are removed, innovation often follows in unexpected ways.
Rebecca Allensworth, a scholar of antitrust and Big Tech, said the payments aren’t necessarily what keep people using Google and likened it to “innovation insurance,” freezing the ecosystem so that rivals don’t have a chance to compete.
“Google fought really, really hard to be able to make those payments,” said Allensworth, a law professor at Vanderbilt. “It makes the industry innovation-proof, in a way. Or at least, if there’s going to be innovation, it’s going to be by and for the benefit of Google.”
Kovacic warned that a Chrome divestiture — one of the more extreme remedies floated — might be more symbolic than effective, calling it “a flashy, shiny object” that wouldn’t do much to solve the issue.
“The big breakup has always been antitrust fascination,” he said. “But you can wonder whether that distracts you from solutions that have more to do with solving the competitive problem that you’ve identified today.”
The DOJ, concerned that Google could repeat its playbook with its artificial intelligence platform Gemini, is also pushing for restrictions on exclusive AI distribution deals — and even proposing data-sharing mandates.
These would force Google to give rivals access to anonymized data about what users search for and which results they click.
But Allensworth emphasized that it’s not a zero-sum game.
“You can have a very strong antitrust remedy … and then two, five, ten years later, that company is actually doing extremely well,” she said. “These are not existential threats to the company.”
AI opportunity
Since 2003 — before the iPhone or Chrome existed — Google’s default search deals with Apple have helped shape the internet. In 2017, Alphabet CEO Sundar Pichai and Cook were spotted sipping red wine at Tamarine, an upscale Vietnamese restaurant in Palo Alto, while their teams finalized one of the most lucrative arrangements in tech: keeping Google the default on Apple devices.
Eight years later, the same two CEOs are still at the helm — but the dynamics have changed. A new era of search is emerging, driven not by contracts, but by generative AI.
Wall Street analysts have considered the upside if Google stopped writing Apple a $20 billion check and redirected that money into AI and cloud, lifting profits while keeping its dominance intact.
“Let’s then assume that Google is limited from paying for search distribution deals, and others can leverage Google’s search tech stack, then what other properties can Google prioritize that may fall outside the scope of these cases?” mused Bernstein analysts in April. “Gemini.”
Niles said that with Gemini the company has a chance to shift from being seen as lagging in AI to potentially offering the strongest product on the market, a change already showing up in benchmark tests.
Pichai said during the trial that he spoke to Cook about adding Gemini to Apple devices but that integration hasn’t yet materialized.
In June 2024, Apple announced the integration of OpenAI’s ChatGPT at WWDC. Apple’s Cue testified that other AI services like Perplexity and Anthropic could also be added to Safari as options.
But neither can touch Google’s scale.
Perplexity reportedly handles 15 million queries per day, compared to Google’s 10 billion.
And Pichai said Google isn’t standing still, testifying in April that AI will “deeply transform” search. Whether that transformation cements Google’s dominance or finally opens the door to rivals is the real test now.
WATCH: Alphabet hits intraday record high on $10B Meta cloud deal, Apple Gemini talks
What seemed like a too-good-to-be-true opportunity in micromobility has turned into a cautionary tale. The Lightning Shared Scooter Company (LSSC) lured investors with promises of leasing scooters in Asia, offering hefty daily returns to Western investors – often average folks instead of seasoned investors. But now regulators and watchdogs warn it was all a well‑orchestrated scam, leaving victims robbed of millions.
The pitch: Easy money, powered by scooters?
From the start, LSSC presented itself as a legitimate shared-scooter rental company with high demand and even higher returns. Investors were told they’d lease scooters, watch them get deployed in bustling Asian cities, and collect reliable daily pay‑outs. The company sold a dream of passive income from a booming market of micromobility. But in reality, it was all smoke and mirrors.
In theory, as the e-scooters were rented and ridden, the investors would earn money from those scooters. In practice, fake revenue stacked up in the app but couldn’t actually be withdrawn. Making matters worse, the scam relied on its victims also roping in friends, family, or other potential “investors”, functioning much like a pyramid scheme.
To appear legitimate, the company circulated an official-looking SEC certificate, though NBC News reported that upon inspection, the document was riddled with typos, grammatical errors, and other flaws that any due diligence process should have caught.
Countless Americans fell for it, along with the company’s shiny marketing materials and supposed celebrity endorsements. According to the Better Business Bureau (BBB), LSSC’s victims often invested anywhere between $1,000 to a staggering $55,000. And this devastation wasn’t isolated; claims span at least 17 US states.
With mounting complaints piling up, the BBB has issued public warnings to anyone who might be approached by LSSC or similar schemes masquerading as shared-mobility ventures.
The scooter industry has been both glorified and maligned in recent years, from legitimate startups redefining urban transit to watchdogs cracking down on mismanagement and faulty batteries. What’s particularly concerning here is that LSSC weaponized well-known industry tropes: scooter popularity, micromobility returns, and a “global venture” to build credibility.
Ultimately, the Lightning Shared Scooter fiasco reads like a modern-day cautionary fable for investors: brand new names, global promises, and passive-income allure can be the perfect ingredients for fraud.
Micromobility is a bright, evolving industry, and one worth supporting, innovating, and investing in. But as this shadowy tale shows, even in our electric future, scams still require old-fashioned skepticism. So if you’re ever asked to “invest in scooters” – especially in far-off markets – pause, ask tough questions, and remember: not every opportunity is what it seems. And if a “business opportunity” requires signing up your friends and family, run for the hills. Or better yet, scoot there!
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