Security Concerns In Red Sea Pose Threat To Indian Exports: Freight Rates May Soar By 30 Per Cent

Indian merchandise exporters caution of a potential 25-30 per cent increase in freight rates for shipments to Europe and Africa, due to the ongoing security issues along the Red Sea trade route.

The Bab-el-Mandeb Strait, a critical passage for global trade, has witnessed disruptions after insurers are hesitating to cover shipments following an attack by Houthi militants.

To make matters worse, insurers are now imposing a $5,200 war risk surcharge, impacting Indian exporters.

The US recently announced the formation of a multinational force, including countries like Bahrain, Canada, France, and Italy, to protect trade in the Red Sea, as reported by Indian Express.

However, if the situation persists, India may face increased energy costs, longer shipping routes, higher insurance premiums, and freight rate impacts.

India heavily relies on the Bab-el-Mandeb Strait for crude oil, LNG imports, and trade, making any disruption a significant concern for the country's economy and security.

Major shipping firms, including Maersk, Hapag-Lloyd, and CMA CGM, have already halted operations in the region, impacting global trade.

The strait's narrow width and geopolitical volatility contribute to its vulnerability to blockades or disruptions, raising broader security concerns in the region.