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The Houthi capture of the Galaxy Leader cargo ship on November 19 in the vicinity of Bab el-Mandeb Strait (the gate of grief), a crucial maritime zone south of the Red Sea, has the potential to have significant repercussions on international maritime commerce and the global economy.
The Houthi assault on the Galaxy Leader on November 19 added a new dimension to the war between Israel and Hamas. The seizure of the cargo ship by the pro-Iranian militia in Yemen highlighted their intention to target the Hebrew State. This action introduces a maritime and international dimension to the conflict between Palestinians and Israelis, which has been raging since October 7. As a matter of fact, this maritime aspect extends beyond the region, as the Bab el-Mandeb Strait is intricately linked to global commerce.
If the initial warning is directed at Israel, the fact remains that it undoubtedly conveys a clear message to all countries with vessels traversing this region.
Bab el-Mandeb: A Vital Strategic Strait
The Bab el-Mandeb Strait, which separates Yemen from Djibouti, is a pivotal point for maritime trade and energy supply, bridging the Gulf of Aden and the Red Sea.
It is regarded as the fourth most crucial maritime route for energy supply globally and holds strategic significance in facilitating the hydrocarbon trade between the Arabian-Persian Gulf and the Suez Canal (Sumed pipeline).
This waterway accounts for 40% of global maritime traffic, with approximately 60 supertankers departing daily from Gulf countries and passing through this strait on their way to Asia. According to available data, this strait witnesses to the daily passage of 4.8 million barrels of oil destined for the Suez Canal. Moreover, it is vital for both importing and exporting countries, as well as riparian nations that this maritime passage remains secure and accessible. It is even against Iran’s interest, being the principal supporter of the Houthis, to disturb maritime trade at Bab el-Mandeb. This is because a portion of the oil and gas traversing this strait is intended for its ally, China.
Rise in Insurance Premiums
With the recent attack on a cargo vessel in the Red Sea, Yemeni rebels have revealed a new threat to maritime transportation, prompting some vessels to alter their course.
This attack will result in a rise in insurance premiums for vessels transiting a region where the risk of conflict is growing.
In fact, it is probable that insurers will take this risk into consideration, resulting in a rise in insurance premiums for shipowners who cross this strait. Consequently, this will have a negative impact on prices for consumers worldwide.
Of note, after the attack on the French oil tanker Limburg in October 2002 off the coast of Yemen, insurance premiums for oil tankers have tripled.
Frequent Attacks
It is important to remember that the assault on a vessel in these waters is not a new occurrence and that the context today is different. In fact, it is alleged that Iran conducted attacks on 26 merchant and military vessels, notably American vessels, between January 2021 and July 2023. The Houthis, for their part, carried out attacks on two Saudi oil tankers in 2018, in addition to the numerous mines that were dispersed throughout the southern Red Sea by the militia.
What Impact Could Entail a Total Blockade?
The possibility of a complete blockade of the Strait remains highly unlikely, as the Houthis have not yet expressed any such intention. Nevertheless, it appears that there is a significant probability of a chaotic scenario in the Bab el-Mandeb Strait. Nonetheless, in the event of a strait closure, the energy supply would remain unaffected as two alternative maritime routes would remain accessible. In Saudi Arabia, the East-West pipeline has the capacity to ship 2.5 million barrels daily from the Arabian Gulf to the Red Sea. Furthermore, the Cape of Good Hope in South Africa could provide an alternative route for fuel transportation to Europe and North America, albeit with a naturally extended transit duration.
