Another blow to the Saudi economy: Global insurance companies suspend coverage for Saudi shipments.

International press reports have revealed severe repercussions for Saudi oil and export traffic in the Red Sea, following the decision announced by the Yemeni armed forces to impose a naval blockade on Saudi Arabia in response to the blockade imposed on the Yemeni people.

The Financial Times quoted two insurance brokers as saying that a number of the leading war risk insurance companies in the Lloyds of London market had informed their brokers to stop selling war cargo insurance to ships linked to Saudi Arabia.

The newspaper explained that the decision excludes from insurance coverage even ships flying the flags of other countries if they have previously docked at Saudi ports or been involved in Saudi contracts and shipments. Reports also indicate that companies such as Ascott and Navium are considering canceling existing policies, some of which cover shipments linked to ports in the region.

For their part, insurance market sources who spoke to Reuters confirmed that insurance coverage prices for ships linked to Saudi Arabia or heading to ports in the southern Red Sea have jumped to record levels, adding hundreds of thousands of dollars to the cost of a single voyage.

These threats have prompted a number of tankers carrying Saudi cargoes to change their routes and head north towards the Suez Canal to circumnavigate the African continent via the Cape of Good Hope, which lengthens journeys, increases fuel consumption and crew costs, and delays the arrival of shipments.

These insurance and field developments pose a direct threat to Saudi oil exports, particularly through the port of Yanbu, which transports up to 5 million barrels per day via the East-West pipeline, as shipping companies are finding it difficult to continue on this route without obtaining war risk coverage, or imposing very high fees to compensate for those risks.

This comes at a time when the Yemeni armed forces announced that the naval blockade on Saudi Arabia has entered into force and that they will respond to “blockade with blockade and escalation with escalation,” while emphasizing that navigation through Bab al-Mandab is not closed to all ships, and that the operations target navigation and the Saudi side exclusively.