A shipping crisis is brewing in the Red Sea, 1,000 miles from Gaza, which could affect the world economy amid the ongoing conflict between Israel and Hamas as a global issue. Four of the world’s five largest container-shipping companies, CMA-CGM, Hapag-Lloyd, Maersk and MSC, have suspended their services in the Red Sea since December 15. This route is used by cargo ships going through the Suez Canal or arriving at the Suez Canal. Iran-backed Houthi militants, armed with sophisticated weaponry on this route, have stepped up their attacks on global cargo shipping. With one of the world’s main trade routes suddenly closed, America and its allies are increasing naval activity in the Middle East. It wants to secure this route by resisting Houthi attacks.
Bab al-Mandab is a narrow strait between Africa and Arabia. Approximately 12 percent of global trade moves through this route. And about 30 percent of containers are transported through this system. It has become a no-go zone as Yemen’s Houthis, backed by the Palestinians in Gaza, attack ships plying the strait. This stalemate has been going on for weeks. Gradually now it is taking an intense shape. On December 15, the Houthis threatened to attack a ship. Another was attacked by drones. MV Pallatium-3 was attacked by ballistic missiles. This was the first use of anti-ship ballistic missiles. And all these ships were Liberian flag carriers. The next day on December 16, the American naval ship, USS Carney destroyed 14 drones over the Red Sea. British ship HMS Diamond destroyed another drone.
The global shipping industry has gone into emergency mode as the risk of ship breakdowns and crew deaths increases. On 15 December Maersk and Hapag-Lloyd ceased their services. CMA–CGM followed them on 16 December. For example, Palladium 3 ship owner MSC. They say they will not use the Suez Canal until passage through the Red Sea is safe. Some ships they will bring by different routes. These four companies account for 53 percent of global container trade. Now smaller container operators, as well as dry-bulk carriers and oil tankers, can follow this path.
This crisis has two major implications. One is for the global economy and the other is the risk of increased military activity in the Middle East. Because the western countries are trying to bring back the previous situation. Let’s start with the economy. Revenue from the Suez Canal is a major source of income for Egypt, which is already in crisis. (Israel would be less affected, with only 5 percent of its trade passing through the Red Sea port of Eilat.) Long-term closure of the Suez Canal would increase trade costs for the global economy. Because new shipping routes around Africa will take longer to transport goods and insurance premiums will increase. If the security crisis in the Red Sea is perceived as a threat to shipping in this route, it is likely that global sea-borne fuel supplies will be disrupted and costs will increase dramatically. Because one-third of oil is transported through this route.
This risk will prompt America and its allies to act. But the Houthi threat has created a dire and complicated situation. The group’s slogan includes ‘the destruction of Israel’. They claim that ‘all ships bound for Israeli ports’ will be targeted unless food and medicine are delivered to Gaza. But most of the ships attacked are neither bound for Israel nor owned by Israel. It is affecting the world. One of the ships attacked by the Houthis was a Hong Kong-flagged ship.
The apparent inconsistencies in the Houthis’ statement should not be mistaken for invalidity. For years, Iran has been training and arming the group to fight a successful insurgency in Yemen and the Islamic Republic’s regional rivals Saudi Arabia and the United Arab Emirates (UAE). They also have some sophisticated weapons. Fabian Hinz of the International Institute for Strategic Studies (IISS), a think-tank in London, said, ‘Right now the Houthis have a huge stockpile of anti-ship missiles, many of which have a range of up to four hundred kilometers.
It is not clear to Western officials whether Iran is conducting the attack itself. Israeli intelligence is still unsure whether the latest attacks have the approval of Iranian special forces, which work in conjunction with the Houthis. However, the group is believed to have received intelligence on shipping from Iranian surveillance ships in the Red Sea. However, Iran does not have complete control over Houthi attacks. More countries will be involved in such attacks.
Diplomacy can help resolve this crisis. In 2015, Saudi Arabia and the UAE intervened on behalf of the internationally recognized government in Yemen’s civil war. In March 2022, the Saudis agreed to a ceasefire. This leaves the Houthis in control of the capital Sanaa and the strategically important western coast. They may soon announce a roadmap to make the ceasefire permanent and end the war. A commitment to end attacks on ships at sea could be part of any negotiations.
However, there are fears of a major military response to the Houthi threat. A multinational task force led by the US Navy is already operating off the coast of Yemen to prevent the Houthis from forcing their way onto ships. This includes both Egypt and Saudi Arabia. American, British and French warships have repelled Houthi drones and missiles in recent weeks. America has also asked Australia to send a warship.
But this defense system continues to try to contain the crisis. The Houthis have proven that a few drones and missiles can enter at any time even through these breaches. But one possible next step involves armed escorts for commercial ships, which the US used during the so-called war between Iran and Iraq in the 1980s. However, naval sources say that too many warships are required for this.
The main option is to strike directly at the Houthis and their arsenal. Both the US and Israel have made plans to attack the Houthis’ arsenals. America should increase its involvement in the Middle East: The Biden administration focused on expanding the Red Sea Task Force and putting diplomatic and economic pressure on Iran. But Israel does not want another new conflict. They are already under pressure from the US to end the attack on Gaza. Tel Aviv is concerned about the Lebanese militant group Hezbollah. Hezbollah is firing missiles at Israel almost every day. Yet if Iran and the Houthis continue to attack, one of the world’s main trade routes will be shut down. The risk of a bigger conflict may be inevitable.