12% of world trade passes through the Red Sea. The Suez Canal is still considered a vital project for connecting the Mediterranean – Red Sea and by extension, of course, Europe – Asia.

Now free trade is at risk. The numerous attacks by Yemen’s Houthi rebels on ships crossing the Red Sea has resulted in decisions by shipping and oil companies to find safer routes. The Houthi rebels, who are backed by Iran and have openly sided with Palestinian Hamas, have said they are targeting ships with ties to Israel.

The need for alternative solutions in global shipping is emphasized by the British energy company BPsuspending transport through the Red Sea. “We will maintain this precautionary pause, under constant review depending on the evolving circumstances in the region”was the conclusion of her official announcement on Monday as, as she said, the situation at the crossing is “deteriorating”.

Uptrend again in barrel price

BP is the first oil and gas company to decide to stop its own tankers. So far, decisions to stop crossing the Red Sea have only come from shipping companies such as Maersk and Evergreen.

Although BP’s biggest UK competitor, Shell has declined to comment on the developments, analysts worry that if other oil companies follow suit, oil prices will soar again. After all, an upward trend has already been registered, with the barrel hovering around 78 dollars. There is also concern about the rise in UK inflation with official announcements expected tomorrow, Wednesday. So far, however, it stands at 4.6%, still far from the Bank of England’s 2% target.

The Red Sea is one of the world’s most important passages for the transportation of oil, liquefied gas, but also consumer goods. Richard Mead, editor-in-chief of Lloyd’s List, one of the world’s oldest newspapers with a shipping interest, told BBC radio today that “the problem will not only affect oil, but the entire world trade that passes through the Red Sea and translates to about a trillion in value, annually”.

High premiums or expensive route?

This situation has also shot up the insurance costs paid by shipowners. London insurance companies are gradually increasing the war risk premium and it has now reached 0.5% – 0.7% from 0.07% at the beginning of December. At the same time, just yesterday they expanded the geographical danger zone of the Red Sea.

The journey that companies will now have to make to get to or from Asia will be done– for this time- around Africa and the Cape of Good Hope (Cape of Good Hope). This means that ships are forced to travel an additional 6,500 kilometers and extend their journey by nine days.

It remains to be seen, whether the US multinational military operation codenamed “Operation Prosperity Guardian” will be effective in immediately addressing the crisis in the region. The UK, France, Spain, Italy, Netherlands, Norway, Canada, Bahrain and Seychelles are also involved in the operation.