Maritime insurance costs have soared due to ongoing disruptions in the Strait of Hormuz and the Bab al-Mandeb Strait, two critical waterways for global trade. Yemen’s Iran-aligned Houthi group announced a blockade of Saudi Arabian ports and ships in the Bab al-Mandeb Strait, which links the Red Sea to the Indian Ocean, earlier this week.

This development adds to the existing turmoil in the Strait of Hormuz, where tensions have escalated amid the US-Israel conflict with Iran. Tehran demands that ships seek its approval before passing, while the US has enforced a naval blockade on vessels linked to Iran.

On Thursday, Iran’s Islamic Revolutionary Guard Corps (IRGC) reported an explosion that set a tanker ablaze in the Strait of Hormuz after it attempted to navigate the southern route off Oman’s coast. Iranian media also stated that two other vessels turned back following the incident.

Before the conflict, approximately 120-140 vessels, including about half oil tankers transporting roughly 20 million barrels daily, passed through the strait each day. Recent data from S&P Global shows a decline to ten vessels on Tuesday from sixteen on Monday.

Insurance premiums for ships traversing these straits have surged, with companies increasingly reluctant to insure voyages due to heightened risks of attacks, according to a report by S&P Global.

The Houthis justified their blockade by citing nearly 12 years of a Saudi-imposed siege on Yemen, stating it is now time for Yemen and the Houthis to respond in kind.

Sources