How shipping insurance rates are rising, as Hormuz, Bab al-Mandeb shut down
Summary
Shipping insurance costs have risen sharply due to fighting and blockades in two key global shipping routes: the Strait of Hormuz and the Bab al-Mandeb Strait. Iran and Yemen’s Houthi group have both restricted passage through these waterways, causing fewer ships to pass and making travel riskier for vessels.Key Facts
- The Strait of Hormuz connects the Persian Gulf to the Gulf of Oman and is vital for global oil shipments.
- Iran’s Revolutionary Guard Corps attacked a tanker in the Strait of Hormuz and warned no tankers would pass as long as the US acts against Iran.
- Normally, about 120-140 vessels use the Strait of Hormuz daily, but traffic has dropped significantly due to conflict.
- Insurance costs for ships passing through the Strait of Hormuz have increased from 1-3% to 7.5-10% of the ship’s value.
- Shipping insurance rates for moving crude oil from the Gulf to China are now four times higher than the five-year average.
- The Bab al-Mandeb Strait connects the Red Sea to the Indian Ocean and is controlled by the Iran-supported Houthi group.
- The Houthis recently declared a naval blockade against Saudi Arabian ports and launched attacks on Saudi oil tankers.
- Both these disruptions are increasing dangers for maritime shipping and driving up the cost of insurance around these routes.
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