by Jonathan Saul
The cost of shipping goods through the Red Sea is on the rise as Yemen’s Houthis intensify their attacks on ships connected to Israel, sparking concerns about potential disruptions to global supplies passing through the region, according to industry sources.
The narrow Bab al-Mandab Strait, which links the Red Sea and the Gulf of Aden, serves as a prime location for targeting and attacking ships, explains Duncan Potts, a former vice admiral with Britain’s Royal Navy and previous maritime security commander in the Gulf.
Potts, currently a director at Universal Defence and Security Solutions consultancy, emphasizes the significance of these attacks, asserting that they pose not just a regional geopolitical threat, but a potential global strategic economic threat as well. As a result, war risk premiums have surged this week to between 0.1% – 0.15% to 0.2% of a ship’s value, up from 0.07% the previous week, based on market estimates on Tuesday.
Munro Anderson, head of operations at Vessel Protect, a marine war risk specialist under insurer Pen Underwriting, highlights the continued instability in the Red Sea, which is expected to drive increased rates in the short to medium term. Shipbroker Braemar’s estimates reveal that average daily rates for supertankers, capable of carrying up to 2 million barrels of crude, have risen to over $60,000 a day, compared to around $40,000 a day in the previous month.
According to a maritime security source, the recent attack is particularly significant as it marks the first assault occurring at night, demonstrating a new capability of the Houthis. Israel’s southern port of Ashdod, a key terminal, views these attacks as a direct threat to its maritime trade. Kitack Lim, secretary-general of the UN’s shipping agency, stresses that commercial shipping should never suffer as a collateral victim of geopolitical conflicts. Lim urges member countries to collaborate in ensuring unhindered and safe global navigation.