In a recent episode of CNBC's "Mad Money," host Jim Cramer expressed caution to investors about the potential effect of the ongoing Red Sea crisis on the Federal Reserve's fight against inflation.
Cramer highlighted the rising shipping costs due to the crisis, which he believes could hinder the Fed's ability to control inflation. The crisis has led to substantial disruptions in global shipping routes, causing major companies to take longer and more expensive routes, resulting in a surge in freight prices.
Cramer warned that the crisis could potentially drive up crude prices due to the Red Sea's proximity to the Middle East's energy production. He also suggested that these factors could result in a rise in inflation, considering the recent consumer price index and retail sales figures for December. Additionally, he cautioned that the crisis could have a significant impact on the broader economy.
The Red Sea crisis has been a cause for concern in recent weeks, exacerbated by the seizure of a U.S.-controlled tanker by Iran, leading to a sharp increase in oil prices. The U.S. responded by reclassifying the Houthi rebels as terrorists after their second attack on an American-operated ship in the Red Sea, a move expected to significantly impact global trade.
Cramer previously cautioned that the market could be on the brink of a significant downturn due to the unsustainable rise of certain tech stocks. These developments have raised concerns about the sustainability of the market's current trajectory.