How Houthi attacks can impact global shipping across the Red Sea

The Houthis, a large tribal alliance in western Yemen which controls the country's capital, Sanaa, have opened up a new front in Israel's war on Gaza by targetting cargo ships in the Red Sea.

While the US and its Western allies have done nothing to stop the Israeli onslaught on Gaza, they were quick to create a 10-nation international force to prevent the Houthis from interrupting international shipping.

But the US-led multinational force faltered at the very beginning as France, Spain and Italy announced that their navies would not operate under Washington’s Operation Prosperity Guard.

The Houthis have targeted several ships, which they say were travelling to Israeli ports through the Bab el Mandeb Strait and the Suez Channel.

On Sunday, there was a deadly confrontation between the Houthis and the US-led coalition, which targeted the Yemeni group’s three boats killing its 10 fighters because they attacked a container ship travelling across the Red Sea.

A Wall Street Journal editorial called the Houthi attacks in the Red Sea "the most significant threat to global shipping in decades" as US Defence Secretary Llyold Austin rushed to the Gulf to cement the "multinational security initiative" against the Yemeni group.

Global shipping in the Red Sea accounts for 12 percent of worldwide trade, as an estimated $1 trillion in goods annually pass through the Bab el Mandeb Strait, which is close to the Houthi-controlled western Yemen coast.

“This route accounts for approximately 40% of the world maritime trade,” says Kaan Devecioglu, an expert at Orsam, an Ankara-based Turkish think-tank, who did his Phd dissertation on US-China Competition in the Bab al-Mandab Strait from the Perspective of Power Transition Theory (2011 – 2021).

Several shipping companies, including the world's largest– Italian-Swiss giant Mediterranean Shipping Company (MSC) and France's CMA CGM – stopped operations in the region. BP, the oil giant, also suspended shipping operations through the Red Sea. Denmark's AP Moller-Maersk also halted operations after the weekend incident, days after it had resumed it.

The Houthi attacks have also forced ships to take a longer route around Africa’s Cape of Good Hope, which increases the trip from around 19 days to 31 days, adding to the shipping costs, according to experts.

But even the Cape of Good Hope route - where pirates are active - is vulnerable to further Houthi-inspired pirate attacks, Devecioglu tells TRT World. Changing the commercial route badly impacts global shipping, increasing costs for companies because the Red Sea is the most economical waterway between Europe and Asia, adds Devecioglu.

Among other problems, the Houthi attacks have also increased insurance costs for shipping companies, which have to pay almost 250 percent more for their shipping coverage. Now Israeli ports carry similar risks to Russian and Ukrainian ports, for which insurance companies increased their premiums to one percent of the shipload value due to the war risk, as they increased their premiums to 0.7 percent for the Red Sea shipping, says Devecioglu.

“Therefore, war risk insurance for a ship that wants to pass through the Red Sea and carries cargo worth 1 million US dollars corresponds to 70 thousand US dollars, which indicates an increase in transportation costs,” says Devecioglu.

Increasing expenses for shipping companies can also potentially lead to soaring prices across the globe, putting Israeli Prime Minister Benjamin Netanyahu’s government in a difficult spot in terms of global production and trade.

Are supply lines in danger?

Houthi attacks in the Red Sea have the potential to negatively affect global supply chains, as happened with a ship accident in the Suez Channel during the Covid-19 period, according to Devecioglu.

“The Red Sea is a critical transit point, especially in terms of hydrocarbon logistics. 30 percent of container trade and 10 percent of global oil passes through the Red Sea. In this sense, hydrocarbon producers, retailers and importers are worried,” says the analyst,

The impact on the global markets won’t be good if big companies like MSC and Maersk, which account for 40 percent of maritime transportation, decide to avoid the route. Some Chinese shipping giants have also suspended their Red Sea operations.

“So when big companies stop shipping their ships, it makes sense that it's time for people who depend on their supply chains to worry,” says the analyst.

Hit them where it hurts

The fallout from the disruption of global shipping could increase public pressure on Western governments to push for ending the war in Gaza.

The Houthis are part of the Axis of Resistance, an Iranian-backed front, which includes Lebanon's Hezbollah and Iraqi Shia groups.

While the US and its allies have formed an international force on the Red Sea, the Houthis appeared to be least concerned.

"Even if America succeeds in mobilising the entire world, our military operations will not stop... no matter the sacrifices it costs us," said Mohammed al Bukhaiti, a senior Houthi official, on X, formerly Twitter.

The Houthi defiance has sent waves of nervousness across the globe as the Western media has published articles discussing "the uncertainty about what is motivating" the Yemeni group and its "apparent fearlessness".

On the other hand, the Operation Prosperity Guard clearly demonstrated that the Western bloc has more concerns about their economic interests than humanitarian matters, according to Mohamed Bin al Wazir al Awlaki, a Yemeni analyst.

If the US-led multinational force confronts the Houthis, it can retrigger the Yemeni civil war, which has largely been calm since the 2022 ceasefire, he says. Many analysts also fear that a Houthi-West confrontation can turn the Gaza war into a regional conflict between Israel and the forces of the Axis of Resistance. But Devecioglu does not see this happening.

In recent years, the US and its Western allies slashed their humanitarian aid to Yemen, one of the world’s poorest countries, which went through one of the worst humanitarian disasters due to the civil war between Saudi-UAE-led coalition forces and Iran-backed Houthis.

"It is clear that if the region catches fire, there is nothing more important than international shipping routes" for the Western bloc and its allies," wrote al Awlaki on X.

Houthi attacks might also hurt Yemenis

But Najat Sayim Khalil, a retired Yemeni professor at Sanaa University, believes the Houthi attacks could also hurt her country in case of an all-out war between the Western bloc and the militia group.

"It is a very complicated situation for a Yemeni like me," she says, referring to both the Gaza war and its global repercussions and Yemen's precarious situation. "I am concerned about Yemen because its humanitarian situation is in a dire state," she adds.

"Of course, these attacks will have negative effects on international trading. Bab el Mandeb strait is a very important channel. But the biggest negative impact will be on Yemen. What will happen to Yemeni people if the attacks continue," Khalil tells TRT World.

"It will bring the international powers to the Red Sea. As a result, the Houthis must deal wisely with this situation," she says, adding that the Houthis are not powerful enough to deal with any US-led international force.

She also believes that Yemenis and people from other countries in the region need "to support our brothers in Gaza", showing Israel that it's not the only power that can dictate its rule over others. But "as we are doing this, we have to also keep the dire state of Yemeni people in our mind.”