Houthi attacks rocking Red Sea trade routes likely won’t end anytime soon

Drone and missile attacks by Yemen-based Houthi militants have upended shipping through the Red Sea and Suez Canal، a narrow waterway through which some 10% of the world’s trade sails.

U.S. Central Command over the weekend said it shot down “14 unmanned aerial systems launched as a drone wave from Houthi-controlled areas of Yemen.” A day later، oil major BP announced it would “temporarily pause” all transits through the Red Sea، following similar decisions by shipping giants Maersk، MSC، Hapag-Lloyd، and CMA CGM.

Security coalition

The Pentagon said Monday it was forming a maritime security coalition with allies to counter the threat and provide protection for shippers، who as of Tuesday had diverted more than $80 billion worth of cargo away from the Red Sea.

Many tankers and cargo ships that would normally transit via the Suez Canal to the Indian Ocean are instead being rerouted around the continent of Africa، which adds 14 to 15 days on average to sea voyages. International logistics firm DHL warned that “the diversion will significantly increase transit times between Asia and Europe and require shipping lines to increase planned capacity.”

The changes have already spiked insurance premiums on ships and contributed to a bump in oil prices. And U.S. military might in the area may not be enough to quell the disruptions.

“A dedicated naval task force will be able to more effectively intercept drone and missile attacks and prevent boarding operations، but the task force won’t be able to be everywhere all at once،” Ryan Bohl، senior Middle East and North Africa analyst at Rane، told CNBC.

“So long as there are significant numbers of civilian ships moving through this area، the Houthis will have plenty of targets to choose from.”

But who are the militants attacking the ships، and why are they doing it? And will a U.S.-led naval security coalition be effective enough to make the Red Sea trade routes safe for trade again?

What happens next?

The U.S.-led naval coalition، which is still being formed، “is collectively capable of deploying a considerable maritime force in the Red Sea،” said Sidharth Kaushal، sea power research fellow at ​​​​the London-based Royal United Services Institute. Other members of the multinational initiative include the U.K.، Bahrain، Canada، France، Italy، the Netherlands، Norway، and Spain.

“As we have seen with the USS Carney’s recent activity in the region، modern vessels can provide considerable protection to both themselves and other ships in a theatre against air and missile threats،” Kaushal said، referencing the American guided-missile destroyer that shot down 14 drones on Saturday.

But the challenge remains، Kaushal said، because of the “relatively low cost of the drones and missiles” targeting shipping and the fact that naval ships still have to return to friendly ports to reload their air defense interceptors.

Another major risk is the threat of escalation. The most effective way to take out the Houthi threat is to attack their launch sites — which “would not automatically result in a regional conflagration، but could raise the risks of one،” Kaushal said، adding that “I don’t think that either the Houthis and Iran or the U.S. wants a wider escalation at this point in time.”

Corey Ranslem، CEO of maritime security firm Dryad Global، expects the threat to shipping “to continue for the foreseeable future as long as the conflict continues in Gaza،” he told CNBC.

“Depending on how the U.S.-led coalition comes together، we could also see the threat level against commercial shipping decline if their efforts are effective،” he said.  

Ranslem predicts minimal economic impact in the short term. But each year there are “approximately 35،000 vessel movements... primarily trading between Europe، the Middle East and Asia” in the Red Sea region، accounting for roughly 10% of global GDP، he said.

That means that if the threats continue، countries in those regions could see significant economic impacts. Israel’s economy could be seriously affected as well if more shipping companies decline to take on cargo destined there; two companies have already done just that.

“For the Houthis، the challenge will be to present enough of a threat to deter shipping companies from passing through the Bab al-Mandab while avoiding actions that could trigger an overwhelming military response from the U.S.-led coalition،” said Torbjorn Soltvedt، principal MENA analyst at Verisk Maplecroft. 

“The Houthis don’t need to physically prevent ships from passing through the Red Sea; they only need to cause enough disruption to make maritime insurance premiums prohibitive or compel most shipping liners to suspend activities there.”