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Israel-Hamas War: How Are Houthi Attacks on Ships in Red Sea Affecting World Trade? – News18

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Last Updated: December 16, 2023, 13:21 IST

Dubai, United Arab Emirates (UAE)

The USS Mason shot down a suspected Houthi drone flying in its direction during an incident near the key Bab el-Mandeb Strait on Wednesday. (AP File Photo)

The USS Mason shot down a suspected Houthi drone flying in its direction during an incident near the key Bab el-Mandeb Strait on Wednesday. (AP File Photo)

Western warships are patrolling the area and have shot down Huthi missiles and drones several times

Shipping giants Maersk and Hapag-Lloyd have announced the suspension of passage through a Red Sea strait vital for global commerce. This comes after Yemen’s Houthi rebels escalated attacks on ships passing through the Red Sea during the Israel-Hamas war.

Israeli-linked vessels have been targeted, but the threat to trade has grown as container ships and oil tankers flagged to countries like Norway and Liberia have been attacked or drawn missile fire while traversing the waterway between Africa and the Arabian Peninsula. Around 10 percent of the world’s trade passes through the Red Sea, according to The Associated Press.

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. They have targeted ships in the region. Notably, the attacks have increased since the start of the Israel-Hamas war. They have used drones and anti-ship missiles to attack vessels and in one case used a helicopter to seize an Israeli-owned ship.

They have threatened to attack any vessel they believe is either going to or coming from Israel. “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.

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 significant portion 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 is most of the world’s manufactured products.

HOW ARE HOUTHI ATTACKS AFFECTING TRADE?

Copenhagen-based Maersk said recent attacks on commercial vessels in the southern Red Sea “are alarming and pose a significant threat to the safety and security of seafarers.” It noted a missile was fired at but missed one of its container ships traveling from Oman to Saudi Arabia on Thursday. “We have instructed all Maersk vessels in the area bound to pass through the Bab al-Mandab Strait to pause their journey until further notice,” the company said in statement Friday, referring to the narrow waterway that separates Yemen from East Africa and leads north to the Red Sea.

The company says it’s monitoring the security situation and is working to minimize the effect on customers. Shipper Hapag-Lloyd, whose vessel was attacked Friday, said it was pausing its ships through the Red Sea until Monday and “will decide for the period thereafter.” Some Israeli-linked vessels have 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. The single biggest immediate impact of the Houthi escalation has been increased insurance costs. Recent attacks 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.

Insurance Cost Doubled

There is “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 USD 50 to USD 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. 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.”

(With agency inputs)

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