How are Houthi seizures in the vital Red Sea shipping lane impacting global trade?

Attacks by Iran-backed rebels are forcing some Israeli-linked vessels to take long way around Africa; while oil market shrugs off incidents, insurance costs for ships soar

This photo released by the Houthi Media Center shows Houthi forces boarding the cargo ship Galaxy Leader on November 19, 2023. (Houthi Media Center via AP)
File: This photo released by the Houthi Media Center shows Houthi forces boarding the cargo ship Galaxy Leader on November 19, 2023. (Houthi Media Center via AP)

LONDON (AP) — Yemen’s Houthi rebels have escalated attacks on ships passing through the Red Sea during the Israel-Hamas war, raising concerns about the impact on the flow of oil, grain and consumer goods through a major global trade artery.

Israeli-linked vessels have been targeted, but the threat to trade has grown this week as a Norwegian-flagged oil tanker was struck and missiles were fired at a vessel carrying jet fuel toward the Suez Canal, where about 10 percent of the world’s trade passes through.

Here are things to know about the recent attacks and the impact on global shipping:

Who is attacking ships in the Red Sea and why?

The Houthis are Iranian-backed rebels who swept down from their northern stronghold in Yemen and seized the capital, Sanaa, in 2014, launching a grinding war against a Saudi-led coalition seeking to restore the government.

The Houthis have sporadically targeted ships in the region over time, but the attacks have increased since the start of the war between Israel and Hamas.

They have used drones and anti-ship missiles to attack vessels and in one case used a helicopter to seize an Israeli-linked ship and its foreign crew.

File: This photo released by the Houthi Media Center shows Houthi forces boarding the cargo ship Galaxy Leader, November 19, 2023. (Houthi Media Center via AP)

In recent days, they have threatened to attack any vessel they believe is either going to or coming from Israel. That has now escalated to apparently any vessel given the attacks this week, with the Houthis also hailing vessels by radio to try to convince them to change course closer to the territory they control.

“The numerous attacks originating from Houthi-controlled territories in Yemen threaten international navigation and maritime security, in grave contravention of international law,” the European Union foreign policy office said Wednesday.

Houthi “interference with navigational rights and freedoms in the waters around the Arabian Peninsula, particularly the Red Sea, is unacceptable.”

Why is the Red Sea important?

The Red Sea has the Suez Canal at its northern end and the narrow Bab el-Mandeb Strait at the southern end leading into the Gulf of Aden. It’s a busy waterway with ships traversing the Suez Canal to bring goods between Asia and Europe.

A huge amount of Europe’s energy supplies, like oil and diesel fuel, come through that waterway, said John Stawpert, senior manager of environment and trade for the International Chamber of Shipping, which represents 80% of the world’s commercial fleet.

So do food products like palm oil and grain and anything else brought over on container ships, which are most of the world’s manufactured products.

How are Houthi attacks affecting trade?

Some Israeli-linked vessels have apparently started taking the longer route around Africa and the Cape of Good Hope, said Noam Raydan, senior fellow at the Washington Institute for Near East Policy. That lengthens the trip from around 19 days to 31 days depending on vessel speed, increasing costs and adding delays, she said.

The global oil market has shrugged off the most recent attacks. Prices have fallen, and the market is more worried about weak demand in major economies.

File: A Yemeni man carries a gun as he takes part in march to express solidarity with the people of Gaza, in the Houthi-controlled capital Sanaa on December 2, 2023. (MOHAMMED HUWAIS / AFP)

The single biggest immediate impact of the Houthi escalation has been increased insurance costs.

The attack and attempted strikes this week show the increased threat to vessels in the Red Sea and represent a “significant impediment” to commercial shipping in the region, said Munro Anderson, head of operations for Vessel Protect, which assesses war risks at sea and provides insurance with backing from Lloyd’s, whose members make up the world’s largest insurance marketplace.

“The latest incident represents a further degree of instability facing commercial operators within the Red Sea which is likely to continue to see heightened rates across the short to medium term,” he said.

Insurance costs have doubled for shippers moving through the Red Sea, which can add hundreds of thousands of dollars to a journey for the most expensive ships, said David Osler, insurance editor for Lloyd’s List Intelligence, which provides analysis for the global maritime industry.

For Israeli ship owners, they have gone up even more — by 250% — and some insurers won’t cover them at all, he said.

While shippers are applying a so-called war risk charge of $50 to $100 per container to customers bringing over everything from grain to oil to things you buy off Amazon, that’s a low enough fee that it should not drive up prices for consumers, he said.

File: This November 12, 2018 photo shows the USS Carney in the Mediterranean Sea. (Mass Communication Specialist 1st Class Ryan U. Kledzik/US Navy via AP)

Osler expects insurance costs to keep rising but said the situation would have to get a lot worse — such as the loss of several ships — to raise prices considerably and make some ship owners rethink moving through the region.

“At the moment, it’s just an inconvenience that the system can handle,” he said. “Nobody likes to be paying hundreds of thousands of dollars more, but you can live with it if you have to.”

Could the Houthis block the Red Sea?

Unlikely, experts say. The Houthis have no formal naval warships with which to impose a cordon, relying on harassing fire and only one helicopter-borne assault so far. Meanwhile, US, French, and other coalition warships patrol the area, keeping the waterway open.

Still, the attacks are making the shipping industry nervous, and “it’s not being taken lightly,” said Stawpert of the shipping chamber. But “you’ll still see there’s an awful lot of trade going through the Red Sea because it’s such a crucial supply line for Europe and Asia.”

He noted that the Houthis’ area of influence in the waterway also remains limited.

“I just don’t see there being a possibility of the Houthis shutting transport through the Red Sea,” he said. It is “simply not how the shipping industry works. It’s not how we respond to threats like this. We will do everything we can to mitigate any such threats and keep trade flowing.”

That’s been on display in other conflicts like the war in Ukraine, with the closure of some parts of the Black Sea, Stawpert said.

He doesn’t see a threat to shipping in general or closure of Red Sea routes, but “if that were to arise as a potentiality, I think we would see a much more robust reaction from navies in the area.”

The Houthis have declared themselves supporters of the Palestinian cause and vowed to keep attacking Israel and ships they believe have links to Israel. Since October 7, they have launched drones and missiles targeting Israel, some setting off sirens in Eilat.

Over 1,200 people were killed in Israel on October 7, most of them civilians, when thousands of Hamas-led terrorists stormed the border and launched a murder and torture spree with monstrous brutality, raping women and girls, mutilating corpses and burning entire families alive. The terrorists abducted roughly 240 more people, taking them as hostages to the Gaza Strip.

Over 18,000 Gazans have been killed so far in the fighting, according to the Hamas-run Gaza health ministry — a figure that cannot be verified and includes terrorists as well as civilians killed by errant Palestinian rocket fire. Israel says it has killed 7,000 Hamas operatives.

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