We now have the third in a series of ship attacks linked to the Israel-Hamas war. In the latest, on Sunday, Nov. 26, 2023, the Liberian-flagged tanker Central Park, managed by Zodiac Maritime (part of Israeli billionaire Eyal Ofer’s Zodiac Group), was seized by armed assailants off the coast of Yemen.
The attackers fled as the US Navy destroyer USS Mason closed in. The Mason pursued and apprehended them. Two missiles fired from Houthi-controlled Yemen then landed near the Mason on Monday morning. (“US Navy seizes attackers who held Israel-linked tanker. Missiles from rebel-controlled Yemen follow,” https://apnews.com/article/israel-palestinians-hamas-war-yemen-ship-attack-526842504dc9f6bb7ca6e1d5104f77a3).
The Central Park (Zodiac Maritime via AP)
The series of attacks began on Nov. 19, when the Houthis seized a vehicle transport ship named the Galaxy Leader in the Red Sea off Yemen, on the pretext that the ship was Israeli. However, it was found to only be partially owned by Israeli tycoon Abraham Ungar, and the ship was leased out to a Japanese company at the time of the hijacking. The ship was taken by the Houthis to the Yemeni coast. (“Yemen’s Houthis claim to hijack Israeli ship in Red Sea; Jerusalem: It isn’t Israeli,” https://www.timesofisrael.com/yemens-houthis-claim-to-hijack-israeli-ship-in-red-sea-jerusalem-it-isnt-israeli/)
Houthi forces rappel from a helicopter and board the Galaxy Leader
(Houthi Media Center via AP)
The Houthis have a stated policy of attacking any ships “carrying the flag of the Zionist entity,” owned or operated by an Israeli company.
Then, on Friday, Nov. 25, the container ship CMA CGM Symi, owned by Israeli billionaire Idan Ofer (Eyal Ofer’s brother), was attacked by a suspected Iranian Shahed-136 drone while in international waters of the Indian Ocean. The drone exploded, damaging the ship but not injuring any of the crew. (The same drones have been used by Russia in attacking Ukraine, as recently as Saturday.) (“An Israeli-owned ship was targeted in suspected Iranian attack in Indian Ocean, US official tells AP,” https://apnews.com/article/israel-palestinians-hamas-ship-drone-attack-symi-39929cae42a191b2f242896a053123a7)
What is clear is that the US Navy is engaged in war and under attack by the Hamas-Houthi-Iran-backed alliance.
Here’s a good backgrounder on the impact of the Houthi attacks: “How Houthi attacks affect both the Israel-Hamas conflict and Yemen’s own civil war – and could put pressure on US, Saudi Arabia,” https://theconversation.com/how-houthi-attacks-affect-both-the-israel-hamas-conflict-and-yemens-own-civil-war-and-could-put-pressure-on-us-saudi-arabia-216852.
Hamas has succeeded with the help of their Houthi allies in raising the insurance premiums on shipping in many parts of the world. That is added to the higher war-risk insurance premiums already in play thanks to Putin’s invasion of Ukraine and the attacks by Russian forces on Black Sea shipping of Ukrainian grain.
Some primary takeaways:
1.Higher war insurance is a pass-through expense that leads to higher prices worldwide. Hamas attacks and Putin attacks are directly responsible for that economic outcome. The higher premiums weren’t there the day before the attacks on either country (Ukraine or Israel).
2. The pass-through leads to higher prices and results in upward inflation pressure. There is nothing any central bank can do about higher inflation originating in war-risk insurance. Don’t blame the Fed; blame Hamas and/or Iran and/or Putin.
3. Premiums are likely to stay elevated until hostilities subside.
4. Premiums are adjustable and can become further elevated if hostilities expand.
We must watch the Houthi-Hamas-Iran alliance carefully. Houthi-launched missile attacks have occurred repeatedly since October 7th. Some of those missiles were longer-range and were most likely supplied by Iran. (“Israel deploys missile boats in Red Sea as Houthis attack from Yemen,” https://www.reuters.com/world/middle-east/israel-deploys-missile-boats-red-sea-regional-tensions-surge-2023-11-01/)
Israeli shipping has sought and received help from the Israeli government. (“Israel's ship industry urges government to help with jump in war insurance,” https://www.reuters.com/world/middle-east/israels-ship-industry-urges-government-help-with-jump-war-insurance-2023-11-02/)
We are watching transportation and shipping companies and other transport forms carefully for rising risks and higher costs.
This is a more dangerous world now, thanks to the bad actors that are waging actual shooting war against the alliance of Western countries and economies. Russia and its nexus of Iran, Belarus, North Korea, and others are only part of the problem. Hamas, Hezbollah, Syria, Iran’s Quds Force, the Yemeni Houthis, Islamic Jihad, and others add to global danger.
Meanwhile, the Congress of the United States has yet to fund an expanded aerospace-defense budget as it remains bogged down in culture war politics.
We are underweighting the transport sector in the US Equity ETF portfolio.
Reading list on war-risk insurance
“War Risk Insurance: What it is, How it Works,” https://www.investopedia.com/terms/w/war-risk-insurance.asp
“War risk underwriters calculate exposure to Israel-Hamas war,” https://www.businessinsurance.com/article/20231012/STORY/912360389/War-risk-underwriters-calculate-exposure-to-Israel-Hamas-war
“Israel marine war risk rates set for tenfold jump,” https://www.insuranceday.com/ID1145644/Israel-marine-war-risk-rates-set-for-tenfold-jump
“Israel-Hamas war may up exporters’ insurance premiums, shipping costs: GTRI,” https://economictimes.indiatimes.com/news/economy/foreign-trade/israel-hamas-war-may-up-exporters-insurance-premiums-shipping-costs-gtri/articleshow/104264012.cms
And here’s a more general economic risk analysis report: “Gaza war a threat to fragile world economy, analysts warn,” https://www.arabnews.com/node/2411216/business-economy
