Persistent Houthi attacks in the Red Sea are pushing up shipping insurance premiums and threatening global oil supply, according to market data. A prediction market now gives a 4.8% probability that West Texas Intermediate crude oil will hit $110 per barrel by July 2026 — a level not seen in years.
Rising insurance costs for Red Sea transits
Insurers have been hiking premiums for vessels passing through the Bab el-Mandeb strait, a chokepoint connecting the Red Sea to the Gulf of Aden. The attacks, launched from Yemen by the Iran-backed Houthi group, have forced some shipping lines to reroute around the Cape of Good Hope, adding days and fuel costs to journeys. But for those still using the Red Sea, the price of protection has climbed sharply. Brokers report that war risk premiums for a single voyage can now run into the hundreds of thousands of dollars, depending on the ship and cargo.
Oil supply fears grow
The Red Sea is a vital artery for crude and refined products moving from the Middle East to Europe and beyond. Any sustained disruption to tanker traffic could tighten supplies and push up prices. The prediction market's 4.8% probability for $110 oil in July 2026 reflects a low but real chance of such a spike—driven partly by the Houthi threat and partly by broader geopolitical tensions. While no major oil producer has cut output yet, traders are watching the situation closely.
What comes next
Shipping companies are expected to continue reassessing their routes in the coming weeks. Insurers will likely adjust premiums further based on attack frequency and severity. The Biden administration has launched airstrikes against Houthi targets in Yemen, but the group has vowed to keep targeting vessels linked to Israel or its allies. No end to the attacks is in sight, leaving the insurance market and oil traders on edge.
