AMU Intelligence Middle East Original Terrorism

Red Sea Attacks and Their Effects on the Global Economy

Following the terrorist attack against Israel on October 7, Hamas sympathizers in the Middle East have taken actions to target U.S. military forces in the region and international ships in the Red Sea. The primary threat to shipping in the Red Sea and the Bab al-Mandab Strait stems from Houthi militants in Yemen, who have taken responsibility for the attacks.

The Houthis claim that they are trying to target Israeli ships. While that may be true to some extent, the Houthis have also struck commercial ships belonging to other nations.

U.S. Navy vessels in the Middle East have shot down both drones and missiles launched by the Houthis. Now, Washington is working with its allies to build a coalition and ensure maritime freedom in the area.

Related: Regional Blocs Appearing and Increasing Around the World

Houthi Attacks Show That International Shipping Can Be Easily Affected in Areas Such as the Red Sea

The attacks by the Houthis demonstrate the ease by which international shipping can be disrupted by targeting choke points along shipping routes. However, it also demonstrates the number of resources necessary to counter such threats, a theme that will become more common as global tensions increase.

The Israeli-Hamas War Has Yet to Spread to Lebanon

The current Israeli-Hamas war is now two months old. Unsurprisingly, there has been plenty of fallout stemming from Israel’s invasion of Gaza.

Rumors persist of the war expanding into Lebanon. While Hezbollah and the Israel Defense Forces (IDF) have exchanged fire, the fight hasn’t spread.

Yemen’s Houthis and the Iranian Influence

In Yemen, the Houthis, backed by Iran, have used their strategic location to use Iranian-made weapons to target ships off the Yemeni coast. This way, Iran has used the Houthis as a proxy force to exert some influence over the war in Gaza and avoid directly participating in the conflict.

This approach has proved influential. At the north and south ends of the Red Sea are two significant choke points in maritime trade. For instance, 12% of all global trade passes through the Suez Canal, according to New Zealand Foreign Affairs and Trade.

Although that 12% doesn’t sound like much, consider that the Panama Canal is experiencing a historic drought, according to Reuters. The drought has forced ships to wait up to a month for transit, so more ships must find alternate routes to their market.

As a result, shipping costs are increasing and the availability of goods such as energy and food are affected. By targeting choke points in the Red Sea, the Houthis cause similar disruptions.

Related: Iran Is Growing Closer to Becoming a Nuclear Power

Disruptions to Any Canal Have a Cascade Effect on International Shipping and Economies

With the Panama Canal struggling, any disruption elsewhere in heavily transited maritime routes such as the Suez Canal means cascading economic disruption globally. In some cases, all it takes is the threat of disruption to increase insurance costs to shippers, which is then passed along to consumers.

Shipping through the Red Sea may be experiencing a manageable threat. But the number of resources necessary to ensure free passage can be taxing, and Iran is well aware of this fact.

In the Persian Gulf, Iran regularly threatens to close the Straits of Hormuz, which impacts global energy prices. Depending on the timing, those pricing shifts could be significant.

Iran may not have the ability to shut down the Straits of Hormuz or completely stop traffic in the Red Sea. However, the threats and sporadic attacks are enough to force the navies of larger countries to expend energy and resources to ensure that international shipping traffic can continue.

This same issue occurred when Somali piracy was at its peak and again when a single ship, the Ever Given, shut down the Suez Canal for 18 days in 2021.

The costs of disruption to shipping from the Somali threats and the Ever Given incident were significant to the global economy. But the cost of sending ships from multiple navies was even more significant.

Red Sea Attacks Could Lead to Increased Fuel Problems and Food Insecurity

With global conflicts on the rise and the continued escalation of the China-Philippines dispute over territorial waters, the threat to global maritime choke points will likewise rise, according to the International Institute for Strategic Studies. With the threat to international shipping increasing in areas such as the Red Sea, the problems of energy and food insecurity will rise as well.

William Tucker serves as a senior security representative to a major government contractor where he acts as the Counterintelligence Officer, advises on counterterrorism issues, and prepares personnel for overseas travel. His additional duties include advising his superiors in matters concerning emergency management and business continuity planning.

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