Jim Cramer Warns Houthi Assault In Red Sea Could Impede Fed's Fight Against Inflation, Advises Investors To Be Cautious

In a recent episode of CNBC’s “Mad Money,” host Jim Cramer cautioned investors about the potential impact of the ongoing Red Sea crisis on the Federal Reserve’s fight against inflation.

What Happened: Cramer highlighted the escalating shipping costs due to the Red Sea crisis, which he believes could hinder the Fed’s ability to control inflation. The crisis, caused by recent attacks on ships traveling through the Red Sea, has led to significant disruptions in global shipping routes, reported CNBC.

These disruptions have forced major shipping companies to take longer and more expensive routes, leading to a surge in freight prices. Given the Red Sea’s proximity to the Middle East’s energy production, Cramer also warned that these issues could potentially drive up crude prices.

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"Right now, I don't think you should be chasing the shipping stocks—it's a bit late for that," Cramer said. "I'd rather own some other transports, again, like FedEx Corp FDX or Canadian Pacific Kansas City Ltd CP."

He suggested that these factors could lead to a rise in inflation, especially in light of the recent consumer price index and retail sales figures for December. Cramer also cautioned that the crisis could have a significant impact on the broader economy.

Why It Matters: The Red Sea crisis has been a cause for concern in recent weeks. The crisis was further exacerbated by the seizure of a U.S.-controlled tanker by Iran, which led to a sharp increase in oil prices. The situation escalated to the point where the U.S. reclassified the Houthi rebels as terrorists after their second attack on an American-operated ship in the Red Sea. This move is expected to have a significant impact on global trade.

These developments have led to concerns about the sustainability of the market’s current trajectory. Cramer previously cautioned that the market could be on the brink of a significant downturn due to the unsustainable rise of certain tech stocks.

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