- 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.
- 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.
- 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.
- 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.
- 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.