A wave of Houthi missile attacks has spooked shipping companies and energy markets.

December 26, 2023, 4:58 PM
In a photo released by the Houthi military on Nov. 20, a Houthi helicopter flies over the Galaxy Leader cargo ship in the Red Sea.
In a photo released by the Houthi military on Nov. 20, a Houthi helicopter flies over the Galaxy Leader cargo ship in the Red Sea.
A Houthi helicopter flies over the Galaxy Leader cargo ship in the Red Sea on Nov. 20. Houthi military via Reuters

Moses may have parted the Red Sea, but now, thanks to a wave of Houthi missile attacks, shipping companies are departing it in droves.

So far, the Iran-backed Yemeni group has launched at least 100 missile and drone attacks against a dozen ships in the Red Sea, according to U.S. officials, and threatened to target all vessels heading toward Israel, whether or not they are Israeli-owned or operated. To avoid suffering the same fate, major energy and shipping companies, including BP and Maersk, have halted their operations there—rattling energy markets and driving up global oil prices and soon everything else. The Red Sea is what connects Asia to Europe, in terms of cargo ships, so disruptions are felt around the world.

The Houthi attacks “have created worries for global freight markets, for the flows of energy commodities, other commodities, goods,” said Richard Bronze, the head of geopolitics at Energy Aspects, a research firm. “It’s a really critical shipping route, so any disruption risks adding delays and costs, which have a sort of knock-on effect in many corners of the global economy.”

Washington is reportedly mulling striking the Houthi base in Yemen, just days after announcing a multinational task force to safeguard navigation in the Red Sea. But the pledge did little to deter the Houthis, who instead vowed to ramp up their attacks and target U.S. warships if Washington executed attacks in Yemen. 

As the threat of escalation looms over wary shipping companies and energy markets, Foreign Policy broke down the Red Sea crisis—and what it could mean for global trade.

You lost me at Houthis.

Backed by Iran, the Houthi rebel group controls vast swaths of northern Yemen, following a yearslong effort to gain power that ultimately plunged the country into a devastating civil war in 2014. After years of fighting between the Iran-armed Houthis and a Saudi-led coalition, at least 377,000 people had been killed by the end of 2021, 70 percent of whom were children younger than 5, according to U.N. estimates. 

Experts say the Houthis’ Red Sea attacks are part of a bid to shore up domestic support and strengthen the group’s regional standing, while the Houthis’ popularity has only grown since they began waging these attacks. As part of Iran’s “Axis of Resistance,” the Houthis have vowed to attack ships transiting the Red Sea until Israel ends its bombardment of Gaza. They’re Iran’s JV team, but they can make a splash at times.

“They seek to accomplish a more prestigious status in the region, as a resistance movement integral to the Iranian Axis of Resistance,” said Ibrahim Jalal, a nonresident scholar at the Washington-based Middle East Institute. The Houthis also “want to be framed as a disruptive actor that’s capable of also offering security by halting attacks,” he said.

Why is the Red Sea so important?

Tucked between Saudi Arabia, Egypt, and Sudan, the Red Sea is an entryway to the Suez Canal and one of the world’s key global trade corridors, overseeing some 12 percent of global trade and nearly one-third of global container traffic. With as many as 19,000 ships crossing through the Suez Canal annually, the inlet is a strategic pressure point in the energy and commodity trade. 

“There’s always been a lot of interest in oil and freight chokepoints because they may be relatively small geographically but they have global impact,” Book said. “Adversaries of the U.S. and Western allies sometimes seek to capitalize on those chokepoints because it can exert such a significant influence over global dynamics.”

Worried by the Houthi attacks, a growing list of major energy companies and shipping firms—including BP, Equinor, Maersk, Evergreen Line, and HMM—have rerouted their ships or suspended operations in the Red Sea. Rather than steaming through the narrow sea, at least 100 ships have instead traveled around the bottom of southern Africa—a detour that can extend ship journeys by thousands of miles and delay freight by weeks.

For now, that will just mean delays, higher costs, and continued disruptions—not the complete upending of global trade. The attacks have “been enough to make certain shippers hesitant to continue using the Red Sea,” said Bronze of Energy Aspects. “But we’re not at a stage where all shipping is being halted or rerouted or that there’s any sort of likelihood of that scale of disruption.”

How is Washington responding?

Washington, which currently has at least three destroyers stationed by the Red Sea, has shot down countless Houthi drones and intercepted missiles launched at transiting ships. To ensure freedom of navigation, Washington also announced this week that it mobilized 10 other countries to form a new task force called Operation Prosperity Guardian.

The operation is set to include Bahrain, Canada, France, Greece, Italy, the Netherlands, Norway, Seychelles, Spain, and the United Kingdom, U.S. officials said, although details are still murky and there remains ongoing confusion about what it will look like. Italy, for example, has said it is sending a frigate to the Red Sea under its long-standing plans—not as part of Operation Prosperity Guardian, Reuters reported. According to the Associated Press, several other countries also agreed to take part in the task force but preferred to remain anonymous. (Many Arab countries don’t want to be seen as defending Israel just now.)

That “underline[s] how tricky it’s been to assemble this coalition and perhaps the limited enthusiasm for many countries for being too visible in confronting this threat and in standing sort of shoulder to shoulder with the U.S. on this issue,” Bronze said.

Apparently undeterred, the Houthis have vowed to continue the fight. “Even if America succeeds in mobilizing the entire world, our military operations will not stop unless the genocide crimes in Gaza stop and allow food, medicine, and fuel to enter its besieged population, no matter the sacrifices it costs us,” Mohammed al-Bukaiti, a senior Houthi official, posted on X, formerly Twitter.

That could mean continued uncertainty for energy and shipping companies, many of which are waiting for more robust reassurances and greater stability until they feel comfortable resuming operations in the Red Sea.

“From a shipping company or a tanker company perspective, I think it’s probably safe to say that they’re going to err on the side of caution until they have some sense that the underlying risks have changed,” said Book of ClearView. Maersk, for instance, acknowledged that its shipping diversions would disrupt operations but stressed that the safety of its crews is paramount.

More fireworks could soon come. Washington is reportedly considering military strikes targeting the Houthis’ base in Yemen if the task force fails to thwart future attacks. The Houthis have threatened to strike U.S. warships in response, potentially paving the way for future escalations. 

The United States could also snap back previously levied sanctions on key Houthi figures as a dissuasive measure—but Saudi Arabia isn’t sold on that idea, since Riyadh is trying to negotiate an end to the yearslong quagmire in Yemen and worries that heavy-handed U.S. tactics could complicate its withdrawal.

What exactly is Saudi Arabia’s calculus here?

After years of involvement in the Yemen war, Riyadh wants out. Saudi Arabia has been working to extricate itself from that war and to make peace with both Tehran—the two powers normalized relations in March—and the Houthis. 

As Saudi Arabia and the Houthis inch closer to securing a peace agreement, experts say Riyadh has adopted a cautious approach, wary of taking any steps that could jeopardize its fragile detente with Tehran or derail peace talks. But continued escalations in the Red Sea could throw a wrench in Riyadh’s plans. 

“If the U.S. were to attack targets in Yemen, not only could it threaten the truce that Saudi Arabia has struck with the Houthis, but it could interfere with that detente between Iran and the kingdom,” Book said. And that could threaten what is still one of the world’s biggest oil producers and exporters at a time when crude oil is already trading north of $70 a barrel.

“If that were to happen,” Book said, “then risks to production could come back, and that would change the picture, potentially adding more upside risk to the crude price.”


  *Christina Lu is a reporter at Foreign Policy. Twitter: @christinafei