By Jonathan Saul

LONDON (Reuters) - Countries in the Red Sea region need to enhance security to protect seafarers at risk as attacks on merchant shipping worsen, industry officials said on Thursday.

Attacks on ships by Yemen's Iran-allied Houthi militia since November have slowed trade between Asia and Europe and alarmed major powers in an escalation of the war between Israel and Palestinian Hamas militants in Gaza.

Seafarers were innocent victims, Arsenio Dominguez, Secretary-General of UN shipping agency the International Maritime Organization, told a meeting with shipping industry officials on Thursday, adding that freedom of navigation must be upheld, to guarantee the flow of goods by sea.

Stephen Cotton, General Secretary of the International Transport Workers' Federation (ITF), the leading union organisation for seafarers, said the body was "very concerned", adding "seafarers' safety must be the number one priority".

The Houthis are holding 25 crew members from the Galaxy Leader, which was hijacked by the militant group on Nov. 19.

Cotton said the Galaxy Leader's crew must be unconditionally released.

In a positive step, the Indian Navy said on Thursday it had rescued the crew of a U.S.-owned vessel in the Gulf of Aden after a Houthi attack.

In December areas deemed warlike and high risk were extended into the southern area of the Red Sea as part of negotiated arrangements between seafarers and commercial shipping companies, known as the IBF.

Lawyers said the measure increased protection for seafarers.

"This designation triggers increased costs for shipowners, as seafarers covered by IBF agreements are entitled to double their basic pay, along with double compensation for death or disability," David Ashmore, employment lawyer at global law firm Reed Smith, said.

Some 12% of global trade is estimated to pass through the Red Sea.