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Prices of Indian shipments to Europe will increase by 25-30% by Red Sea Crisis

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Court upholds deal to transfer Red Sea islands | News | Al Jazeera
  1. After Houthi militants attacked a ship in the Red Sea, many insurance companies are reluctant to cover shipments in this region. Some insurers are adding a $5,200 war risk surcharge, potentially increasing freight rates by 25-30% for Indian exports to Europe and Africa.
  2. The Bab-el-Mandeb Strait is crucial for global container traffic (30%) and vital for India’s trade with West Asia, Africa, and Europe. Any disruption here could significantly impact India’s economy, especially concerning crude oil, LNG imports, and general trade.
  3. Major shipping companies like Maersk, Mediterranean Shipping Company, Hapag-Lloyd, and CMA CGM have ceased operations through the strait due to security concerns. This disruption affects not only India but also global trade, endangering shipments like basmati rice.
  4. The Bab-el-Mandeb Strait’s security remains volatile, susceptible to disruptions due to regional conflicts. Recent attacks on vessels, including an assault on a Saudi oil tanker by Houthi rebels, have heightened security fears.
  5. Efforts to enhance security include the announcement of a US-led multinational force and the UAE’s plan to build a military base. This disruption’s aftermath includes potential shifts in trade routes, increased energy costs, higher insurance premiums, and reduced merchandise exports, impacting India’s economy and traders.
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