Shipping companies face a new question: What counts as “Israeli”?
The Houthis’ vague targeting criteria are forcing global carriers into complex legal, financial, and political calculations.
The Houthis’ declaration that they will not allow Israeli or Israel-linked vessels to move through the Red Sea signals to the global shipping industry that one of the world’s most sensitive trade chokepoints is once again being priced not by traditional commercial factors such as fuel costs, sailing distance, and supply-demand balances, but by political identity, insurance risk, and assessments of a militant group’s intentions.
The Houthis do not need to physically seal off the Bab el-Mandab Strait to disrupt global trade. Simply defining a broad and ambiguous category of “Israeli” or “Israel-linked” ships is enough to force the international financial and logistics system to grapple with difficult questions of ownership, cargo origin, insurance, and indirect affiliation.
In an industry where a single vessel may carry cargo for dozens of customers, sail under one flag, be owned in another country, managed from a third, and financed by international banks, that ambiguity quickly becomes expensive. Every participant in the supply chain must now reassess who ultimately owns the ship, where the cargo originated, who insures it, and whether any indirect connection could make the vessel a target in the Houthis’ eyes.
After freight rates reached historic highs during the COVID-19 pandemic, 2023 brought a sharp correction. Excess capacity from newly delivered ships, weaker global demand, and easing congestion at major ports helped restore shipping prices to more stable levels. Importers and manufacturers began adapting again to the assumption that the Asia-Europe route through the Suez Canal was the shortest, cheapest, and most efficient option.
A month added to the voyage
That assumption collapsed when Houthi attacks began in late 2023 under the banner of “solidarity with Gaza.” Major shipping lines quickly concluded that the risks to crews and vessels were too high to continue normal Red Sea operations. The immediate response was to reroute ships around the Cape of Good Hope in southern Africa.
The economic consequences appeared almost immediately. In early 2024, the Freightos Baltic Index showed average freight rates from Asia to Northern Europe climbing to $5,492 per 40-foot container, while Asia-Mediterranean rates rose to $6,773. Market intelligence platform Xeneta estimated that some Far East-to-Mediterranean routes exceeded $6,500 per container — roughly 240% higher within weeks of the escalation.
Later in 2024, rates on major trade lanes surged into the $8,000-$10,000 range as longer voyages effectively removed shipping capacity from the market. During 2025, prices eased somewhat as carriers adapted to the African detour and new vessels entered service.
But by early 2026, just as the industry was cautiously considering a partial return to the Red Sea, it became clear that the route remained deeply unstable. At the end of May, spot prices from the Far East to the Mediterranean stood at $4,304 per 40-foot container, while Far East-to-Northern Europe rates were $2,860. The market had already entered this latest phase of threats with a built-in risk premium.
A rerouting around Africa adds roughly 10-14 sailing days each way. That means higher fuel consumption, more ships needed to maintain schedules, and lower effective fleet capacity. OECD estimates suggest the detour adds about $1.7 million to the cost of a medium-sized container voyage, or roughly $272 per 40-foot container before insurance and disruption costs are added.
And the market prices more than fuel. It prices uncertainty, war-risk insurance, contingency fees, and schedule unreliability.
Egypt bears the brunt
The clearest regional loser is Egypt. The Suez Canal is one of the country’s most important sources of hard-currency revenue. When ships avoid Suez and sail around Africa, Egypt immediately loses transit fees. President Abdel Fattah el-Sisi has already said the country lost roughly $7 billion in canal revenue during 2024.
Cairo therefore has a strong interest in restoring confidence in the Red Sea corridor. But maritime confidence is fragile. Shipping companies do not redesign global trade routes because of a reassuring political statement or a quiet week at sea. They need sustained stability, manageable insurance costs, and dependable schedules.
The disruption is also reshaping competition among ports across the Mediterranean, Red Sea, and Gulf regions. Ports such as Jeddah, Yanbu, Aqaba, Ain Sokhna, Port Said, Piraeus, Genoa, Haifa, and Ashdod are no longer competing only on efficiency and turnaround times. Reliability of access has become a central competitive factor.
Hormuz and Bab el-Mandab are becoming one risk
A broader macroeconomic view shows something even more important: the risks surrounding the Bab el-Mandab Strait and the Strait of Hormuz are beginning to merge into a single geopolitical problem.
For decades, the two chokepoints were treated separately. Hormuz was the energy bottleneck through which Gulf oil and liquefied natural gas reached global markets. Bab el-Mandab was primarily the gateway for container trade between Asia and Europe.
Now the distinction is eroding. With the Persian Gulf already under elevated geopolitical tension, Gulf states have increasingly emphasized land-based bypass infrastructure such as Saudi Arabia’s East-West pipeline to Yanbu and the UAE’s Habshan-Fujairah route, both designed to reduce dependence on Hormuz.
But if the Red Sea itself becomes unstable, the strategic value of those alternatives weakens sharply.
The Houthi threat is therefore no longer just a problem for consumer-goods shipping. It has become a major factor in global energy security. According to the U.S. Energy Information Administration, crude oil and petroleum-product flows through Bab el-Mandab fell from an average of 8.7 million barrels per day in 2023 to about 4 million barrels per day during January-August 2024.
That decline suggests the world has already begun structurally reducing exposure to the route, but at significant economic cost.
The next attack could reset the market overnight
The most likely near-term scenario is continued volatility rather than complete closure. As long as the Houthis maintain a high level of rhetoric without systematically striking large numbers of ships, some carriers may experiment with limited returns to the Red Sea.
But the recovery remains fragile. A single successful attack causing serious damage to one vessel could reverse the trend immediately and push large volumes of shipping capacity back onto the longer African route.
The more dangerous long-term scenario is that the Houthis institutionalize a policy of political screening in the Red Sea. In that world, shipping companies would no longer be making a straightforward safety calculation about whether the route is militarily secure. They would be deciding whether to operate in a corridor where the ownership structure of a ship, the identity of its cargo, or the nationality of its end customers could itself become grounds for attack.
That is a risk many insurers struggle to model, and one that could permanently raise the cost of moving goods between Asia, the Middle East, and Europe.
