Houthi escalation puts global trade routes under pressure
Bab al-Mandab Strait emerges as a critical risk point for shipping, energy flows, and insurance markets.
The launching of ballistic missiles from Yemen toward Israel is not merely a symbolic military step by the “axis of resistance.” It amounts to an effective declaration of war by the Houthis, bringing one of the most sensitive and volatile choke points of the global economy back into focus - the Bab al-Mandab Strait and the shipping lanes of the Red Sea. While the Houthis’ statements to date have emphasized that “the finger is on the trigger” and that their actions are directed solely at the “Zionist and American enemy,” markets are unlikely to accept this distinction. For shipping companies and insurers, the Red Sea has once again become a danger zone, and the economic consequences began to build even before the first missile was intercepted on its way to the Negev last week.
The Houthis’ real power lies not in their ability to completely shut down the strait, but in their capacity to generate a “risk premium” that disrupts maritime traffic. As soon as the war broke out on February 28, even before direct Houthi involvement, major shipping companies began preparing for worst-case scenarios. The French shipping group CMA CGM announced the suspension of transit through the Suez Canal, diverting vessels via the longer route around the Cape of Good Hope, adding 10 to 14 days to journeys and significantly increasing fuel and operating costs. Denmark’s Maersk also halted planned voyages through the Bab al-Mandab. From the market’s perspective, the Houthis’ entry into the conflict has transformed an operational concern into a prolonged structural disruption of supply chains between Asia and Europe.
Egypt stands directly in the economic line of fire. The Suez Canal, a critical source of foreign currency for Cairo, is now more vulnerable than ever. A modest recovery was recorded in early February, when the Canal Authority reported the passage of 1,315 ships and revenues of approximately $449 million since the start of the year, but the war has reversed that momentum. According to the World Bank, Egypt has already lost around $7 billion in canal revenues during 2024 and 2025. The canal accounts for roughly 12% of global maritime trade and about 22% of global container traffic. With the Houthis threatening the southern gateway to the canal at Bab al-Mandab, they are effectively constricting one of Egypt’s primary economic lifelines. Even if Cairo maintains that traffic continues as normal, the diversion of vessels around Africa is draining the state of vital foreign currency at a time of mounting domestic economic pressure.
The Houthi threat also affects Saudi Arabia’s efforts to safeguard its oil exports. Since the war began, Riyadh has increased its use of the East-West pipeline (Petroleum Line), which transports oil from fields in the Persian Gulf to the Red Sea port of Yanbu. The objective has been to bypass risks in the Strait of Hormuz, which is influenced by Iran. However, this strategy depends on secure passage through the Red Sea. If the Houthis destabilize Bab al-Mandab, Saudi Arabia’s alternative export route becomes less viable. The Houthis do not need to directly attack Saudi infrastructure to inflict damage; by increasing risks in the Red Sea, they undermine the strategic advantage of Yanbu and potentially force Saudi oil flows back toward the vulnerable Strait of Hormuz.
Other regional alternatives, such as the UAE’s port of Fujairah, located outside the Strait of Hormuz, are also affected. The escalation is already driving up marine insurance costs across the region. Shipowners are required to pay higher “war risk premiums,” which are ultimately passed on to consumers in Israel, Europe, and the Gulf states.
In effect, the Houthis’ entry into the conflict is significant not because of their direct military impact on Israel, but because of their ability to raise the cost of global trade. A new equation is emerging: if the Strait of Hormuz is Iran’s lever over global energy markets, Bab al-Mandab is the Houthis’ lever over container shipping and commodity flows. With both chokepoints under simultaneous threat, even without a full closure, the result is mounting inflationary pressure worldwide, longer supply chains, and increased political and economic strain on Egypt and the European Union.
