On November 27, the United States Maritime Administration (MARAD) issued a warning to commercial ships operating in the Indian Ocean to exercise increased caution and remain cognizant of evolving threats in this region. The warning follows a recent increase in attacks on commercial vessels in the Red Sea by Houthi forces based in Yemen.
The attacks are linked to the Israel-Hamas War and are highly likely to continue while that conflict is ongoing. The security environment in the Red Sea will remain degraded in at least the medium-term as a result, incurring additional costs to shipping through the Suez Canal and the wider region.
Yemeni Houthis are targeting Israeli-linked vessels in the Red Sea
The Houthis are an Iranian-backed group in the ongoing Yemeni civil war that controls territory in Western Yemen, including much of the country’s Red Sea coastline. The Houthis have intervened in the Israel-Hamas War by launching several missile and drone attacks on targets within Israel since October 19. Most of these have been intercepted by air defense systems, so the group has altered its tactics. On November 14, the Houthi leader announced that the group would start actively targeting Israeli-linked ships operating in the Red Sea, and particularly in the narrow Bab el-Mandeb Strait area.
On December 3, the U.S. military announced that there had been four attacks against three commercial vessels operating in the southern Red Sea on the same day. All four attacks involved missiles or drones launched from Houthi-controlled areas of Yemen. Later, a Houthi spokesman confirmed attacks on two Israeli-linked vessels but did not address the attack on the third vessel. The attacks did not result in significant damage.
Two other attacks were reported in the interim on Israeli-linked vessels. It is important to note that among the attack targets the cargo, destination, and operators vary, indicating that the only feature of the vessels targeted by the Houthis is some form of Israeli connection. As a result, any type of vessel operating in the Red Sea area stands to be a potential target.
The Red Sea is a vital maritime route for global shipping
The waters under threat are of vital importance for global trade, particularly for goods shipped between Europe and Asia. This is because all ships using the Suez Canal must also travel through the Red Sea. The alternative maritime route between Europe and Asia requires vessels to travel around the Cape of Good Hope at the southern tip of Africa which can take up to two weeks longer.
The Suez Canal is one of the busiest shipping lanes in the world, used to transport all manner of goods from raw materials to components to finished products. Combining the Suez Canal traffic with ships using ports in northeast Africa and the Arabian Peninsula, around one third of global daily shipping is estimated to pass through the Red Sea/Gulf of Aden area.
Cost of shipping increases through the region
Some shipping companies have already opted to reroute vessels in response to the Houthi threat, but as of December 4 there was no indication of a broader industry trend to divert shipments away from the Red Sea and hence the Suez Canal. However, shipping companies may view Israeli-linked vessels or shipments as high-risk due to the Houthi threat and could choose to reroute specific shipments if the attacks continue, resulting in increased shipping time and costs.
Even shipping companies that continue routing vessels through the Red Sea are likely to see an increase in costs. Marine underwriters already charge premiums for sailing via the Red Sea because regional conflict and piracy cause an increased threat environment. Reports on December 4 indicated that war risk premiums for vessels traveling in the southern Red Sea were around 0.05-0.1% of the value of the ship, up from around 0.03% the week prior to the first attack. Companies are likely to invest in additional security personnel to mitigate this threat, incurring further cost. These increased costs can add up to tens of thousands of dollars and will be passed to customers through increased shipping fees.
Everstream clients are receiving more detailed insights and recommendations about this risk.
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