The escalating attacks by Iran-backed Houthi militants on global shipping flows in the Red Sea have led to major container-shipping companies suspending their services in the region, causing concerns for the world economy. The Houthis, based in Yemen, have been targeting shipping in the Bab al-Mandab strait, a narrow passage through which an estimated 12% of global trade by volume and 30% of global container traffic flows. The attacks have intensified in recent weeks, with the Houthis using sophisticated weapons, including anti-ship ballistic missiles. As a result, the global shipping industry is switching into emergency mode, with major companies like Maersk and Hapag-Lloyd pausing their services.
The crisis has significant implications for the world economy, as a prolonged closure of the Suez route would raise the costs of trade, increase shipping times, and lead to higher insurance premiums. The revenue from the Suez Canal is a major source of income for Egypt, which is already facing a financial crisis. The situation also raises concerns about the risks of military escalation in the Middle East, as Western countries, led by the US, try to re-establish order. The US and its allies are increasing naval activity in the region and may even consider attacking the Houthis to ensure free passage.
The Houthi threat is complex and poses challenges for Western countries. While the group claims to be targeting ships heading to Israeli ports, most of the attacked vessels are neither headed to Israel nor under Israeli ownership. Iran has trained and armed the Houthis, and the sophistication of their weapons is high. Western officials are unsure if Iran is directly directing the attacks, but the broad campaign against shipping aligns with Iran’s strategy of putting pressure on Israel through regional proxies. Diplomacy may help de-escalate the crisis, but a military response is likely. A multinational task force led by the US navy is already operating off the Yemeni coast, but has struggled to keep the crisis under control. The alternative may be to strike the Houthis directly, but this poses risks of further escalation in the region.
