October 7 and the Red Sea: How the Gaza War’s Opening Quarter Reached the Caribbean

Jamaica Homes Global Conflict & Caribbean Impact Review | Published 3 January 2024 | Reporting Period: 3 October – 2 January 2024

Quarterly Briefing

• Hamas launches the deadliest attack on Jewish civilians since the Holocaust on October 7; 1,200 killed, 250 taken hostage.
• Israel launches ground invasion of Gaza in late October; death toll exceeds 21,000 by year’s end.
• Houthis begin attacking Red Sea shipping in November; major carriers divert around Africa by December.
• Panama Canal drought restrictions tighten as El Niño reduces Gatun Lake to critical levels.
• Ukraine war enters its third year; ammunition shortages grow as US aid package stalls in Congress.
• Jamaica ends 2023 with GDP growth of approximately 2%; tourism revenues at post-pandemic record high.

Prologue: A New Conflict That Will Define 2024

The final quarter of 2023 was dominated, from the Caribbean’s perspective, by a single event that unfolded on its first day and whose consequences are still expanding as this edition goes to press. The Hamas attack on southern Israel on October 7 — killing approximately 1,200 Israeli civilians and soldiers, wounding thousands more, and taking 250 hostage — was the deadliest massacre of Jewish people since the Second World War. Within three weeks, Israel had launched a full-scale ground invasion of Gaza. Within seven weeks, Yemen’s Houthi movement had opened a second front in the war by attacking commercial shipping in the Red Sea in stated solidarity with Gaza. As 2024 begins, the Caribbean is watching the early stages of a Middle East crisis that appears capable of transforming global shipping economics for months or years.

Jamaica enters January 2024 from a position of genuine economic strength: the tourism sector recorded its best post-pandemic performance, the BOJ’s easing cycle is underway, and unemployment is at historically low levels. But the quarter’s end has introduced two structural threats that will test that resilience: the Red Sea shipping disruption that is already forcing major operators to reroute cargo around the Cape of Good Hope, and a compounding Panama Canal water-level crisis that has made 2023–24 the first period in modern history when both of the world’s principal east-west maritime chokepoints have been compromised simultaneously.

October 7: The Attack That Changed Everything

At approximately 6:30 a.m. on October 7, Hamas and allied militant organisations launched a coordinated assault on southern Israel from Gaza, breaching the border fence at multiple points, overrunning military bases, and attacking civilian communities including the Kibbutz Be’eri, Kibbutz Nir Oz and the Supernova music festival near Re’im. The attack’s scale and coordination were without precedent: approximately 3,000 Hamas fighters crossed the fence, and the initial assault killed approximately 1,200 people in a single morning. Some 250 individuals — civilians, soldiers, foreign nationals, including people from Thailand, Nepal, Argentina and the United States — were taken to Gaza as hostages. It was the deadliest day for Jewish people since the Holocaust and the deadliest attack on Israel in its history.

Israel’s military response was immediate and overwhelming. After a period of aerial bombardment, ground forces entered Gaza in late October. The operation’s stated objectives were the destruction of Hamas’s military and political capacity and the recovery of the hostages. By January 2, the Gaza Health Ministry had reported more than 21,000 Palestinian deaths, with the majority of Gaza City’s residential districts heavily or entirely destroyed. A ceasefire of seven days, mediated by Qatar in late November, enabled the exchange of 105 hostages for 240 Palestinian prisoners before breaking down. The remaining hostages — approximately 130 as of January 2 — remain in Gaza. The war is in its fourth month with no diplomatic resolution in sight.

For Jamaica and the Caribbean, the immediate economic signal from October 7 was an oil price spike to approximately $93 per barrel in October, driven by market fears of a broader regional war involving Iran. Those fears moderated somewhat through November and December as the conflict remained bounded to Gaza and Lebanon-border exchanges, but the underlying risk of escalation involving Iranian oil exports or the Strait of Hormuz keeps Caribbean fuel import costs elevated relative to pre-war levels.

The Red Sea: A New Shipping Crisis Takes Shape

On November 19, Houthi naval forces seized the Galaxy Leader, an Israeli-owned cargo vessel transiting the Red Sea, and took its crew hostage in what the Houthis described as an act of solidarity with Gaza. Over the following weeks, Houthi drones and missiles struck additional commercial vessels in the Red Sea and Gulf of Aden — attacks that the movement justified by citing the Gaza war and Israel’s blocking of aid to the territory. By mid-December, the pace and reach of Houthi attacks had caused Maersk Line, MSC, CMA CGM, Hapag-Lloyd and other major container carriers to announce the suspension of Red Sea transits and the rerouting of their fleets around the Cape of Good Hope.

The United States responded in December by forming Operation Prosperity Guardian, a multinational naval coalition to protect Red Sea shipping, including contributions from the United Kingdom, Bahrain, Canada and other partners. The coalition’s patrols intercepted several Houthi drones but did not prevent attacks from continuing. By the close of this quarter, the Red Sea crisis was one week old as a major global shipping disruption. Its full cost to Caribbean economies — elevated freight rates, longer transit times, insurance surcharges — will accumulate through 2024. As this edition is published, the crisis is accelerating.

Ukraine: The War Grinds Into Year Three

The war in Ukraine completed its second full year in February 2024, and the quarter produced no decisive changes in the military situation. Ukrainian forces continued to hold most of the front line while Russia maintained pressure particularly around Avdiivka in Donetsk. Both sides conducted drone and missile strikes on each other’s energy infrastructure and supply lines. A US military aid package of approximately $60 billion — essential for maintaining Ukraine’s ammunition stocks and equipment replacement — had been stalled in the US House of Representatives since October, as Republican leadership tied its passage to immigration policy demands. Ukrainian commanders were already warning of ammunition rationing on some sectors of the front.

For Caribbean economies, Ukraine’s war continued its second year of distorting global wheat, fertiliser and energy markets. With Russia and Ukraine together supplying roughly a third of global wheat exports, flour prices in Jamaica remained elevated above pre-war baselines. The war’s resolution remained as distant as ever as 2024 began, with neither side in a position to achieve its stated objectives through military means and diplomatic channels essentially closed.

The Panama Canal Crisis

A severe El Niño drought reduced water levels in Gatun Lake — the reservoir that feeds the Panama Canal’s locks — to the lowest levels recorded since the canal opened in 1914. The Panama Canal Authority responded by restricting daily vessel transits from the normal 36–38 per day to as few as 18–22, and by imposing draft restrictions that reduced the cargo capacity of vessels crossing the canal. The resulting bottleneck created a queue of hundreds of vessels waiting off both ends of the canal, with waiting times extending to weeks and auction prices for transit slots reaching millions of dollars.

For Caribbean importers whose supply chains relied on transpacific goods routed through Panama, the crisis meant additional delays and costs on top of the Red Sea disruption. The two crises together represented the worst simultaneous compression of global maritime chokepoints since the Suez Crisis of 1956. Jamaica’s construction and manufacturing sectors, which had been performing well through 2023, were already beginning to feel the effects in input cost increases and delivery schedule disruptions.

Haiti and Venezuela: The Region’s Own Crises

Haiti’s gang crisis continued its escalation through the quarter, with the Viv Ansanm coalition expanding its territorial control across Port-au-Prince and violence reaching new levels in the Artibonite region. The Kenya-led Multinational Security Support mission, authorised by the UN Security Council in October 2023, had still not deployed by January 2024: Kenyan domestic court challenges, funding gaps and logistical delays kept the mission in preparation. The humanitarian situation in Haiti — with more than 300,000 internally displaced and violence rates at their highest in decades — was deteriorating faster than the international response was materialising. CARICOM continued to advocate for rapid MSS deployment and additional funding.

Venezuela’s December 3 referendum, in which the government of Nicolás Maduro asked citizens to endorse the incorporation of Guyana’s Essequibo region into Venezuelan territory, produced an officially reported 95 per cent vote in favour. Guyana immediately invoked the International Court of Justice’s jurisdiction and secured emergency provisional measures ordering Venezuela to take no action to alter the status of the disputed territory. CARICOM issued a collective statement of support for Guyana. The episode raised the temperature of the dispute significantly, with Venezuela’s government treating the referendum result as a democratic mandate for its territorial claim.

Jamaica: A Strong Year, a Challenging Horizon

Jamaica’s economy completed 2023 in better shape than most of its Caribbean peers. GDP growth of approximately 2 per cent was driven by tourism — which recorded its strongest post-pandemic year, with stopover arrivals and visitor expenditure both approaching record levels — and by continued momentum in construction and real estate. The BOJ’s easing cycle, begun in the second half of 2023 as inflation declined from its 2022 peaks, had brought the policy rate down from 7 per cent toward 6.5 per cent, easing some pressure on borrowers and the housing market. Unemployment was at historic lows. Remittances from the North American diaspora continued to provide a significant cushion for household incomes.

The housing and real estate market was active entering 2024, with demand for residential units in Kingston, Montego Bay and the resort parishes maintaining its post-pandemic momentum. NHT mortgage approvals remained elevated. Construction costs, however, were beginning to reflect the early signals from the Red Sea disruption — imported materials were arriving on incrementally higher terms, and the trend was expected to worsen through the first quarter. The combination of a Panama Canal bottleneck and an emerging Red Sea crisis meant that Jamaica’s importers were entering 2024 facing the most challenging global logistics environment in recent memory.

Looking Ahead

As this edition is published on 3 January 2024, the Gaza war is three months old, the Red Sea crisis is three weeks old, and the Panama Canal crisis is three months old. None of these disruptions shows any sign of near-term resolution. The Houthi campaign will continue for as long as the Gaza war continues, and the Gaza war shows no ceasefire pathway. Jamaica’s fundamental economic strength — its tourism base, its diaspora connections, its historically low unemployment — is real. But 2024 has opened with more simultaneous external threats to Caribbean economies than at any point since the COVID-19 pandemic. The test of the year ahead is whether that strength is sufficient to absorb them.

Jamaica Homes Global Conflict & Caribbean Impact Review is published quarterly, examining how wars, geopolitical tensions and major international crises have shaped Jamaica, the Caribbean and their economies.