As the world watches Israel battle Hamas, Iran’s Yemen Houthi proxy army is using Tehran-provided missiles and drones to wage a shadow war on the global economy.
The headline topping TradeWinds News’ Dec. 12 marine insurance news update states the bottom-line fact: “War Risk rates set to explode as underwriters fear more Houthi attacks.”
The report contains this economy-rocking comment: “The attack came as the Joint War Committee (JWC) is set to meet this week for its regular quarterly meeting.”
In a moment, I’ll explain why that could attack your wallet. Hint: Global shipping costs affect matters such as global inflation.
A Houthi attack on the Norwegian-flagged tanker Strinda spurred the report. As the Strinda transited the Bab al-Mandab strait (southern Red Sea) late on the night of Dec. 11, an anti-ship cruise missile launched from Houthi territory in Yemen struck the ship and ignited a fire. Some media reports called it a Houthi cruise missile. No, Iran supplied the weapon. Perhaps a Houthi leader punched the button, but Iran calls the shots, literally and figuratively, since Iranian Al-Quds special forces officers control offensive missile operations.
The Strinda’s crew—all citizens of India—fought the fire. A French Navy frigate shot down a suicide drone that was “menacing” the Strinda. A U.S. Navy destroyer showed up to render aid.
In the meantime, the Houthis engaged the world on the propaganda front. Houthi spokesmen claimed that the Strinda was carrying crude oil to Israel. They reiterated a statement made on Dec. 9 that henceforth Houthi fighters will attack any vessel they believe is heading for Israel, no matter the ownership and nationality.
Commercial maritime sources reported that the Strinda was carrying palm oil to Italy from Indonesia, possibly by way of Malta.
The Houthis have attacked other vessels they claimed were going to Israel and facts proved the Houthi information was either dated or wrong.
TradeWinds News and the Norwegian government stated the obvious: The Houthi attack on the Strinda represents a major escalation in Iran’s proxy war with Israel. The U.N.’s International Maritime Organization also expressed “grave concern” for the safety of international shipping.
Some other obvious facts: The Strinda Incident involved three NATO nations: Norway, France, and the United States. Since Indian citizens crewed the ship, India, which is on the verge of becoming the world’s most populous nation, was also involved.
A Norwegian government official, Eivind Vad Petersson, told the media that Norway is working closely with the United States, France, and the UK “both politically and militarily—to ensure free and safe navigation at sea.”
Note that he mentioned military cooperation, perhaps an international naval task force.
Safe transit in the Red Sea matters. The Red Sea connects the Suez Canal to the Indian Ocean. Annually, about 19,000 commercial ships transit the waterway.
That’s a lot of money. Iran knows it. So does the Joint War Committee.
The JWC has members from Lloyd’s of London insurance and The International Underwriting Association of London. They represent organizations that underwrite “marine hull war business insurance” worldwide.
The JWC evaluates the risks faced by ships carrying cargo. Higher risk raises the insurance cost. It’s a detailed business involving products carried, geography traversed, crew training, shipper safety records, specific ships, specific cargoes, and very complex politics.
The JWC determines Listed Areas—areas where ship owners must notify underwriters that their ships will traverse.
War is ultra-risky. The Strinda Incident means the “war risk” insurance premium for vessels transiting the Red Sea and the shipping lanes within missile range of Yemen will rise. That means the price of their goods spikes.
Many vessels already avoid Suez and sail around Africa’s Cape of Good Hope. That takes more fuel and transit time—which costs more money—but avoids war risk.
Iranian ayatollahs see this as a demonstration of their global power. But their brinksmanship could trigger a global response that kills a lot of Houthis and puts the ayatollahs on the target list.
