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In just a few months, Yemen's Houthis have captured a huge share of global shipping – and begun to threaten the economy of their stated target, Israel.
While Israel, which is more reliant on the Mediterranean than the Red Sea, has proven resilient, experts warn that the attacks already pose a threat to Israel's economy and could take an even greater toll if they occur despite the by US-led airstrikes continue.
At the port of Eilat, Israel's Red Sea base, shipping activity has fallen by 85 percent, its chief executive told Portal last month. Without a reversal, “we will probably probably have to furlough workers,” he told the Jeruslaem Post.
Houthi attacks begin to alter shipping flows
Firing missiles at merchant ships in the Red Sea, a chokepoint in one of the world's most important sea routes, is proving a sure way to draw the ire of the United States and its allies: nearly a fifth of the cargo goes to the U.S., according to Moody's The east coast usually runs through the Red Sea on the way to the Suez Canal, and global shipping giants have begun sending ships long distances around Africa.
Since launching attacks in solidarity with Palestinians bombed by Israel in the Gaza Strip, the Houthis have maintained that their primary goal is not to upend global trade but to put pressure on Israel to achieve a ceasefire in Gaza .
Mohammed Abdulsalam, a spokesman for Yemen's Houthis, told Portal on Friday that attacks in the Red Sea would continue to focus on Israel's blockade and retaliation for US and British airstrikes. The attacks, he said, represented “just pressure on Israel,” not “on any country in the world.”
Who are the Houthis and why are they attacking ships in the Red Sea?
While the majority of Israel's maritime trade passes through Haifa and other Mediterranean ports – subject to major delays in global shipping due to the Red Sea crisis, but not necessarily more so than ports elsewhere – Eilat is a key entry point for some imports from East Asia, including electric vehicles China, which accounts for the majority of vehicles sold in Israel. Fewer opportunities for sellers to build inventory as fewer cars arrive could contribute to rising prices, the Times of Israel reported.
As for ships traveling through the Suez Canal to Israel's busier Mediterranean ports, many leading shipping companies have halted traffic in or out of the corridor, despite a global coalition trying to allow ships safe passage and US-led attacks the Houthis in Yemen. Danish shipping giant Maersk announced this month that it would redirect all of its ships south – around Africa – “for the foreseeable future.”
The shipping industry has responded to the Houthis' focus on shipping to Israel. Evergreen, the Taiwanese shipping giant, said last month it would immediately “stop accepting Israeli cargo” “for the safety of cargo, ships and crew.” Maersk introduced a surcharge on deliveries to Israel last month to cover rising insurance costs. Ultimately, consumers could bear the brunt of higher insurance prices.
Analysis: What the Houthis gain in Yemen from their attacks on the Red Sea
Even small changes in the supply chain can pose major challenges to the delivery of medical supplies amid an “unprecedented number” of war casualties, said Moshe Cohen, chief executive of Yad Sarah, the largest non-state medical lender in Israel. Delays caused by Houthi attacks could “lead to a life-threatening delay in urgently needed supplies,” he said in an emailed statement.
Israel's economy faces major obstacles as it deals with the fallout from the war in Gaza, which has killed at least 24,927 people in Gaza and began after the Oct. 7 Hamas attack that killed about 1,200 Israelis. Thousands of workers were called to fight.
Houthi attacks are upending trade as ships are forced to travel long distances around Africa
The Bank of Israel said this month that its forecast for Israeli exports in 2024 was 1 percent below its November forecast as Houthi attacks picked up pace. The figure excludes diamonds and start-ups and includes services such as tourism, which has declined due to the conflict. Civilian imports are expected to fall 4 percent next year, down 5 percent from November expectations, according to the central bank. Imports from Asia are likely to be hit hardest, and they usually travel through the southern mouth of the Red Sea, where the Houthis attack ships. According to the Observatory of Economic Complexity, which tracks economic data, China is the largest exporter to Israel, accounting for more than 14 percent of Israel's imports in 2021.
How Israel's war in Gaza became a convoluted crisis that spanned the entire Middle East
The global economic impact of the Red Sea attacks, rather than the specific impact on Israel, may be the greater source of pressure, contributing to a sense among Israel's allies that the entire region could descend into violence. As long as the war in Gaza continues, the risks of the situation in the Red Sea deteriorating further and regional skirmishes like those on the Lebanese border turning into war increase “exponentially,” said Dan Arenson, geopolitical risk advisor at JS Held. a global risk advisory firm. “I think the Biden administration understands that.”
Increased ocean shipping fees from China to North America are forecast to drive up consumer prices, according to a report Tuesday from Freightos, a freight quoting company. If the U.S. economy is hurt by the Houthi attacks, that could prompt President Biden to press Israel to end its war in Gaza, Arenson said. “Patience is clearly wearing thin,” he said. Biden administration officials, including Secretary of State Antony Blinken, have taken a tougher tone toward Israel in recent weeks amid concerns about the rising civilian death toll and rising regional tensions.
Israel-Gaza war
According to National Security Council spokesman John Kirby, US naval forces launched three more attacks against Houthi forces in Yemen on Friday morning, using anti-ship missiles. Internet and mobile communications have been gradually restored in the Gaza Strip, ending a weeks-long outage that left most of the territory's 2.1 million people cut off amid a war and humanitarian crisis.
Pakistan launched retaliatory strikes against militants in Iran on Thursday, the Foreign Ministry said, as tensions in the Middle East appeared to be escalating.
October 7 attack: Hamas spent more than a year planning its attack on Israel. A Washington Post video analysis shows how Hamas exploited vulnerabilities created by Israel's reliance on technology at the Iron Wall, the security barrier on the Gaza Strip border, to carry out the deadliest attack in Israel's history. Stock traders made millions of dollars in anticipation of the Hamas attack, according to a study.
Israeli-Palestinian conflict: The Hamas-controlled Gaza Strip has a complicated history. Learn what was behind the Israel-Gaza War and read about the history of the Israeli-Palestinian conflict.