The Houthi’s Activity is a Threat to Global Trade

The war in Gaza exposed the Israelis and the West to the threat of the Houthis rebels for the first time. As part of solidarity with the “Axis of Resistance”, the Iranian proxy has been trying for about two months to attack any ship linked to Israel that sails near the Bab-al-Mandab Straits, a transit point for 14% of world trade (9 million oil barrels per day), and a strategic link between the Indian Ocean and the Mediterranean Sea via the Suez Canal.

Similar to the threat of Somali pirates in the early 2000s, I believe that the international naval coalition led by USA must take more decisive action than has been done so far, to secure the international shipping lanes. First, The Houthis are not a rational player, and direct action against them will not create deterrence. Therefore, the coalition should send a clear message to Iran, holding them accountable for their support of the rebels from Yemen. It is necessary to clarify that military action against its assets will be considered if the diplomatic axes do not curb the Houthi activity. Second, the US should demand from Iran through the Qatari or Omani intermediary the immediate release of the hijacked ship to the port of Hodeidah in Yemen (“Galaxy Leader”) along with its 25 crewmembers. Third, the naval coalition should respond to the immediate need of the shipping companies for a safe passage in the Red Sea, through extensive military protection and escorting the ships during the passage through the Bab al Mandab Straits.

The Houthi attacks in the Red Sea, which was perceived as an Israeli problem, is undoubtedly turning out to be an international problem and has enormous economic consequences. The Houthi’s activities are dramatically disrupting the global supply chain from Asia to the Middle East and Europe and increases shipping costs. Four of the major shipping firms which covered over 24% world trade, began diverting ships from their regular route through the Suez Canal to a route bypassing the entire African continent, which extends the sailing time by two to three weeks. The marine insurance premiums that the shipping companies pay on the dangerous routes are skyrocketing, and the sea transport prices of containers from China have increased by 61% in the last two months. All of these will eventually lead to an increase in import prices that will be passed on to the consumer, and harm efforts to curb inflation.

So far, the Houthis have attemped to attack more than 21 ships, which are linked to more over 20 countries – some of them distinctly without a link to Israel. The hijacked ship, which did not carry goods and the flag of Israel, is partially owned by a British company. in fact, it is operated by a Greek company, and was leased to a Japanese firm. Beyond the impact on consumers in Israel and Europe, the Houthi disruption in the Red Sea will mainly affect Egypt, which has a clear interest in keeping the trade routes in the Red Sea open and safe. The main concern in Cairo stems from the fact that the risk from the Houthis will cause ships to give up passage through the Suez Canal, the northern entry and exit gate to the Red Sea. The passage through the canal is a critical source of income (over 8 billion dollars per year), and a bright spot for the country’s economy, which is mired in debt.

The new threat emerged shortly after major pressures on supply chains due to the Covid-19 pandemic and the Russian invasion to Ukraine, which increased inflation and led to a global economic slowdown. Complete closure of the Bab al Mandab straits, with an estimated cost of $9.6 billion per day and more than $700 billion per year, would immediately shock the global oil market. Before another global shock hits, immediate actions by the international community to stop the Iranian subversion in the region, must be taken.