When the Houthis attacked the Israeli-linked merchant vessel Galaxy Leader on Nov. 19, it was clear that shipping had entered a new and dangerous phase. Not only did the militia, which rules parts of Yemen, successfully take over a large tanker sailing in the Red Sea: It also filmed the undertaking, which garnered massive global attention. Since then, the attacks have accelerated at such an extraordinary rate that the world’s largest shipping companies will no longer sail through the Red Sea.
When the Houthis attacked the Israeli-linked merchant vessel Galaxy Leader on Nov. 19, it was clear that shipping had entered a new and dangerous phase. Not only did the militia, which rules parts of Yemen, successfully take over a large tanker sailing in the Red Sea: It also filmed the undertaking, which garnered massive global attention. Since then, the attacks have accelerated at such an extraordinary rate that the world’s largest shipping companies will no longer sail through the Red Sea.
That means reduced traffic through the Suez Canal and the Red Sea—and harm to Egypt’s economy. The collision between Middle Eastern acrimony and global shipping means that you’ll have to wait longer for some of your favorite consumer goods.
One must grant the Houthis this: The video they released after seizing the Galaxy Leader and taking its crew hostage was slick. That, of course, was the point. The Houthis were eager to tell the world that they could target any ship they liked. Indeed, the Iran-linked force declared that any Israeli ship might encounter the same fate as the Galaxy Leader. That was no consolation for ships not owned by Israeli firms: The Houthis would define what constituted an Israeli-linked ship.
And since then, the attacks have accelerated fast. All manner of ships traversing the Red Sea have been targeted with missiles, drones, or attempted seizures. On Dec. 12, for example, Houthi fighters fired a missile on the Norwegian-owned tanker Strinda, claiming that it was headed for Israel when it was in fact en route to Italy. Two days later, a tanker owned by Danish shipping line A.P. Moller Maersk was targeted in the Bab el-Mandeb Strait, which connects the Red Sea and the Gulf of Aden, and the day after that, a Hapag-Lloyd-owned container ship was hit. On Dec. 18, another three ships were hit in the Red Sea, including the Cayman Islands-flagged chemical tanker Swan Atlantic.
Western naval vessels are trying to help their merchant-navy colleagues. On Dec. 16, the U.K. Royal Navy’s HMS Diamond shot down a Houthi missile fired against a tanker. The French Navy’s FS Languedoc has downed a drone. Within one morning, USS Carney downed 14 drones heading toward merchant vessels.
But even such help hasn’t calmed the rapidly growing alarm among global shipping lines. On Dec. 15, Maersk and Hapag-Lloyd announced that they were diverting their ships away from the Red Sea. Two days later, CMA CGM of France, the Swiss giant MSC, and China’s Yang Ming joined the exodus from the storied strip of water that connects the Suez Canal (and thus the Mediterranean) with the Bab el-Mandeb Strait (and thus the Indian Ocean). Maersk, MSC, and Hapag-Lloyd represent around 40 percent of ocean shipping.
Their departure is likely to cause a dramatic plunge in traffic through the Suez Canal, which accounts for 12 percent of global trade and an astonishing 30 percent of container shipping. On an average day, 50 ships travel through the canal, transporting cargo worth $3 billion to $9 billion worth of cargo. The Red Sea, which has nearly the same amount of traffic (and which also serves many local ports, including Jeddah, Djibouti, the Port of Sudan, Egypt’s Safaga, and Aden), stands to lose in equal measure. Western navies are trying their best, but it’s no surprise that the shipping lines are diverting their ships.
“The change in dynamic here is that it isn’t shipping caught up in the crossfire of conflict, such as the war in Ukraine, but shipping being directly targeted,” said Simon Lockwood, an executive in charge of shipping at the global insurance broker Willis Towers Watson. War insurance premiums for vessels traversing the Red Sea have already risen to headline rates of at least 0.7 percent of the value of a ship’s cargo. Only Russia’s and Ukraine’s ports have significantly higher war risk headline rates, of around 1 percent.
At a 0.7 percent rate, a ship carrying $1 million worth of cargo through the Red Sea pays $70,000 in war risk insurance alone. And the ship’s owners will pass that cost on. “The first thing that happens when the risks to ships increase is that the premiums rise; that’s how war insurance works,” said Svein Ringbakken, the managing director of the Oslo-based maritime war risk underwriter Den Norske Krigsforsikring for Skib. “And long-established mechanisms help shipping companies pass on these costs to their customers,” he added.
The Houthis’ campaign is, in fact, already wreaking havoc on global shipping. “The East-West container trade relies on the Red Sea and the Suez Canal,” Lockwood noted. “With the major lines diverting to other routes, there will be significant delays and increased cost. And there will be knock-on effects on international trade.”
Ringbakken added: “Now large shipping companies are including in their contracts the option of going around the Cape of Good Hope. That means an additional 10-12 days, or longer in case of tankers that don’t travel very fast. That means that transportation costs will also rise significantly.” The suddenly much longer routes also mean logistical disruption in global supply chains. “We’re entering the same territory as during COVID and after Ever Given,” Ringbakken said. “It’s not good news for the globalized economy. People will have to wait longer for their goods.”
On Dec. 17, the chairman of the Suez Canal Authority (SCA), Osama Rabea, said that since the attack on the Galaxy Leader, 55 vessels had opted to instead travel via the Cape of Good Hope. That’s a small number compared to the 2,128 ships that traversed the canal during that period, but with the major shipping lines just having announced their diversions from the Red Sea, it’s likely to rise sharply.
Even Operation Prosperity Guardian, the aptly named mission to protect Red Sea shipping announced by the U.S. Defense Department, won’t be able to fully restore calm to the choppy waters. The operation’s participating naval vessels will have to act with restraint lest they accidentally trigger a conflict with the Houthis and, by extension, Iran. And if they do use force against the Houthis, for example by firing retaliatory missiles, it still leaves merchant vessels exposed to whatever violence the Houthis decide to visit on them.
Indeed, shipping has become the new front line of geopolitics. As I have documented in Foreign Policy and elsewhere, Iran and Israel have for years been engaged in a proxy war involving shipping, and more recently, China has stepped up its harassment of Philippine vessels to frighten the global shipping industry—and as a result, manufacturers—away from the Philippines.
There is, of course, very little that shipping lines can do to deter such determined attackers, and no navy is large enough to provide escort to all the merchant vessels that might need it.
Even 10 years ago, the necessary technology was so expensive and inaccessible that not even the most ambitious Houthi commander could have pulled off a drone attack on a merchant vessel. But it’s not just that military-style technology has become affordable: The Houthis have identified a gap in global shipping, which can mostly protect itself against piracy and has contingency plans for war.
Until late November, though, shipping lines hadn’t reckoned with sophisticated attacks by statelike militias. The Houthis’ successful campaign in the Red Sea is, in fact, likely to inspire other proxy forces to seek fame and power through attacks on merchant vessels.
In addition to the shipping lines and their customers, there’s one clear loser from the unfolding tanker war: Egypt. The SCA provides one of the country’s most significant and most stable incomes. Between June 2022 and June this year, the SCA saw its revenues reach a record high of $9.4 billion. During that time, 25,887 ships passed through the canal, up from 23,800 during the previous fiscal year. It’s hardly surprising that Rabea, the SCA chairman, has been at pains to reassure shipowners that the risks facing ships in the Suez Canal are manageable.
The question, though, is how Cairo will respond to the predicament posed by the tanker conflict and the harm that it’s causing Egypt. Could it decide to try to punish Iran and the Houthis? That, of course, brings the risk of the tanker war exploding into a more wide-ranging and deadlier one.
Forces keen on disruption have decided that shipping is an extremely attractive target, and it’s even more attractive because some of the world’s most convenient shipping lanes are in geopolitically choppy Middle Eastern waters. Get ready for delayed goods and more expensive consumer products. I hope you bought your Christmas presents long ago. Happy Holidays!
Elisabeth Braw is a columnist at Foreign Policy and a senior associate fellow at the European Leadership Network. Twitter: @elisabethbraw
