Shipping Costs in the Red Sea Hold Firm as Hostilities Resume Again

The cost of shipping goods through the Red Sea is expected to remain high following recent U.S. airstrikes on Yemen, which targeted the Iran-aligned Houthi rebels. The strikes were in response to threats posed by the Houthis to international shipping. The U.S. launched airstrikes on Saturday, targeting the Red Sea port city of Hodeidah and Al Jawf governorate. The Houthis have previously stated they would halt attacks on U.S. and UK linked shipping in conjunction with a ceasefire between Israel and Hamas.

War risk premiums for ships passing through the Red Sea have fluctuated, with rates briefly easing to around 0.5% in January before rising back up to 0.7% in February. Some U.S. and UK linked ships have faced rates as high as 2% in recent weeks. Despite potential discounts, these increased costs amount to hundreds of thousands of dollars for a seven-day voyage. Industry sources predict that rates will remain firm and may continue to rise in the coming days.

The Houthis have been responsible for over 100 attacks on ships since November 2023, resulting in the sinking of two vessels, seizure of another, and the deaths of at least four seafarers. Houthi leader Abdul Malik al-Houthi has threatened to target U.S. ships in the Red Sea in retaliation for ongoing U.S. military actions in Yemen. The uncertain situation has led to heightened risks for commercial maritime traffic in the region, particularly for vessels owned and operated by Israel and the U.S. As a result, insurance rates are expected to increase in response to the heightened threat profile.

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