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Red Sea war insurance rates rise after Houthi Blockade, say sources

Insurance industry sources say that the cost of insurance for shipping goods through the Red Sea increased 'on Monday, after Yemeni Houthis, who are Iran-aligned, announced a naval blockade against Saudi Arabia. This increased risks to merchant shipping.

The Houthis' move opens up a new front in the war against Iran waged by the United States and increases the danger to energy supplies and global trade outside the Gulf.

Sources who declined to identify themselves due to the sensitive nature of the issue said that the indicative war risk premiums increased to around 0.75%, up from 0.3%, the day before the Houthi announcement.

A seven-day trip can cost hundreds of thousands more dollars for even a minor change.

It is unclear how the Houthis will 'carry out' a naval blockade against Saudi Arabia, their northern neighbour along the Red Sea coast, or if it would include a return of attacks on shipping.

Since the U.S. and Israel's conflict with Iran started on February 28, Saudi Aramco has increased its use of the Yanbu Terminal in the Red Sea.

Ambrey, a British maritime security firm, said that vessels flying the Saudi Arabian flag, those owned or operated by Saudi Arabia, and vessels on their way to or from Saudi Arabia, as well as vessels in Saudi Arabian ports or en route, were all deemed 'at high risk' of being attacked by Houthis.

The Houthis committed a mistake during the Red Sea Crisis of 2024 by targeting ships with outdated affiliations to firms. Ambrey stated that it is possible for vessels to be targeted because of a mistaken identity.

Saudi oil exports could be halted to Asia if the Bab el-Mandeb strait is closed. This would also reduce the global supply of oil by 7%.

Red 'Sea traffic is still not back to normal since Houthi attacks on Yemeni coasts began in November 2023, in what they called a'solidarity war with Palestinians.

The Gaza ceasefire of October 2013 was the only time that all Houthi attacks ceased.

In recent months, there have been more suspected Somali piratery and hijackings of ships in the Gulf of Aden. This has increased the dangers to shipping. (Reporting and editing by Susan Fenton; Jonathan Saul)

(source: Reuters)