Since mid-November 2023, the Yemen-based, Iran-backed Houthi rebel group has attacked dozens of commercial ships in the Red Sea, with no signs of slowing down. An exodus of shipping companies from the region now threatens to scuttle supply chains and increase consumer prices just as global inflation begins to ebb. The United States has announced an international security initiative to protect commercial vessels, but some experts say the effort falls short of the necessary deterrence, and others worry a forceful response could propel the region into wider conflict. 

Why are the Houthis attacking ships in the Red Sea?
The Houthis say their strikes are directed at boats with Israeli interests, and that the attacks will continue until Israel ends its war in Gaza. But in practice, the Houthis have targeted ships indiscriminately, experts say. Shipping is notoriously opaque, with vessel ownership and operation, crew nationality, and flag of registry often differing. Fearing attacks, major shippers including global leader A.P. Møller-Mærsk have announced plans to avoid the Red Sea and the Suez Canal—diverting some $200 billion in trade.

How could Houthi attacks affect the global economy?
The Red Sea is one of the most important arteries in the global shipping system, with one-third of all container traffic flowing through it. Any sustained disruption in trade there could send a ripple effect of higher costs throughout the world economy. This is particularly true of energy: 12 percent of seaborne oil and 8 percent of liquified natural gas (LNG) transit the Suez Canal. 

Avoiding the Red Sea means abandoning one of the most common global shipping routes from Asia to Europe. Indeed, 40 percent of Asia-Europe trade normally transits the sea. Ships shunning the Red Sea will have to instead sail around the Horn of Africa, which can cost $1 million more round trip in additional fuel costs. Still, more than one hundred fifty commercial ships have chosen the longer route since November. On the other hand, insurance premiums for ships using the Red Sea have shot up nearly tenfold since the attacks began.