The Red Sea Shipping Crisis (2024–2025): Houthi Attacks and Global Trade Disruption

Executive Summary

Since November 2023, Houthi attacks (over 190 by October 2024) significantly disrupted Red Sea/Aden Gulf shipping (House of Commons Library Specialists, 2025). Freight/insurance costs surged, with many rerouting via Cape of Good Hope (International Crisis Group, 2025). This impacts Europe, Asia, Africa (Suez revenue down) (Delivorias, 2024). Naval coalitions formed, and some military strikes/sanctions occurred (Baldor & Coop, 2025).

The Red Sea’s Strategic Importance

The Red Sea is a crucial sea link between Europe and Asia via the Suez Canal (12% world commerce) (New Zealand Embassy in Cairo, 2021). Container cargo, oil, LNG, and grains are major affected commodities (Delivorias, 2024). Hostilities by the Houthi erupted in the 1990s and persisted as they took control of Sana’a in 2014 (House of Commons Library Specialists, 2025). Following the Gaza war of October 2023, threats by Houthi were again aimed at maritime shipping against vessels involved with Israel, the US, and the UK. The U.S. and its allies responded with military action, further escalating tensions in the Red Sea (International Crisis Group, 2025). 

How This Crisis Is Hitting Global Trade

The Red Sea crisis, caused by Houthi attacks, has generally affected shipping across the globe. Most of the largest shipping companies have been forced to reroute ships via the Cape of Good Hope in Africa, leading to much longer journey times of 10-14 days from Asia to Europe (Delivorias, 2024). This has caused a dramatic reduction of traffic via the Bab al-Mandab Strait and the Suez Canal. According to Figure 2, average daily transit trading volume went down from approximately 4.0 million metric tons towards the end of 2023 to a low of approximately 1.7 million metric tons at the beginning of 2024: a decrease of nearly 57.5% (IMF Portwatch , 2015).

Figure 2. Suez Canal: Transit Trade Volume Oct 2023-May 2024

These have brought about significant cost increases, including a rise in average spot freight container rates and higher insurance costs for vessels transiting through the area. The extended delivery times and increased transport costs are having economic ripple effects, disrupting world supply chains and even likely feeding through to higher inflation. Supply chains built around industries reliant on just-in-time manufacturing have already been brought to a halt, and trade and commodity export volumes for East Africa nations and Middle Eastern nations can be impacted, exacerbating those regions’ underlying economic vulnerabilities (International Crisis Group, 2025; Delivorias, 2024).

Government & Industry Responses

In response to the escalating Red Sea crisis, governments and the shipping industry have implemented countermeasures. Naval escorts and task forces such as the US-led Operation Prosperity Guardian (House of Commons Library Specialists, 2025) and the EU’s Operation Aspides, which will run until February 2026 (Chambers, 2025) have been established to protect commercial vessels and secure freedom of navigation (International Crisis Group, 2025). Beyond the defensive coalition, the US has also conducted direct military strikes against Houthi targets in Yemen, often in conjunction with the UK (Baldor & Coop, 2025). These strikes, sometimes referred to as Operation Poseidon Archer, have targeted Houthi radar sites, missile launchers, drone facilities, and weapons storage depots in areas like Hodeida, Sana’a, and Saada (International Crisis Group, 2025). Despite these military operations, the Houthi attacks have persisted, highlighting the challenge of deterring the group and ensuring the safety of Red Sea shipping (Raydan, 2024). Most shipping companies have therefore turned to rerouting measures, going the longer route around the Cape of Good Hope in Africa to avoid the dangerous Gulf of Aden and Red Sea (Raydan and Nadimi, 2025), but this detour is costly in fuel and delays shipments (New Zealand Embassy in Cairo, 2021). The crisis has highlighted the vulnerability of major maritime chokepoints and has likely influenced maritime security policy by provoking discussion on increased international cooperation, more robust enforcement of arms embargoes, and the potential need for additional security measures in the area.

 Strategic Shifts and Investment Opportunities Hidden in the Crisis

The situation in the Red Sea presents however a range of possibilities. The persistent threats have set off a realignment at the strategic level towards investing in advanced security technologies for naval protection, including detection, intelligence sharing, and countermeasures (Raydan and Nadimi, 2025). This can create a boom in the security technology market.

Moreover, the disruption highlighted the need for other routes of trade, and investment and development have been put into routes bypassing the Red Sea, such as the route bypassing Africa’s Cape of Good Hope (Delivorias, 2024). Raising costs and transit times (New Zealand Embassy in Cairo, 2021), this strategic realignment presents opportunities for countries along these alternative routes to enhance their logistics and port infrastructures.

Finally, the heightened threats in the Red Sea have prompted higher shipping insurance premiums (International Crisis Group, 2025). This kind of instability in the insurance sector offers scope for insurers to restructure their products and new risk assessment and mitigation policies for maritime shipping in unstable regions.

Risks for Global Investors & Companies

Continued volatility and unpredictability of Houthi attacks pose a major risk, with the group expanding targets despite warnings. The risk of conflict spillover into Gulf shipping lanes is high due to regional tensions and the substantial multinational military presence. Supply chain disruption affects automotive, electronics, and agriculture with ships taking a detour around Africa, incurring cost and transit time (International Crisis Group, 2025). This has already caused production halts (Delivorias, 2024). The long-term impact on Suez Canal revenues is of specific concern to Egypt, with a significant reduction already experienced, compounding economic weaknesses (House of Commons Library Specialists, 2025). Shipping companies are still cautious despite lulls in attacks (Chambers, 2025).

What Comes Next

Long-term international maritime security requires collective effort beyond military interventions. Reduction of trade routes diversification is called for to lessen Red Sea disruption, as testified by the boost in traffic via the Cape of Good Hope. Companies now must integrate geopolitical risk analysis into their logistics planning to pass through such risky chokepoints and design supply chains robust.

Reference list

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7. New Zealand Embassy in Cairo (2021). The Importance of the Suez Canal to Global Trade Market Report 18. [online] New Zealand Ministry of Foreign Affairs and Trade. Available at: https://www.mfat.govt.nz/assets/Trade/MFAT-Market-reports/The-Importance-of-the-Suez-Canal-to-Global-Trade-18-April-2021.pdf.
8. Raydan, N. (2024). Houthi Ship Attacks Pose a Longer-Term Challenge to Regional Security and Trade Plans. [online] The Washington Institute. Available at: https://www.washingtoninstitute.org/policy-analysis/houthi-ship-attacks-pose-longer-term-challenge-regional-security-and-trade-plans.
9. Raydan, N. and Nadimi, F. (2025). Despite the Houthi Pledge to Limit Attacks, the Red Sea Remains Highly Volatile. [online] The Washington Institute. Available at: https://www.washingtoninstitute.org/policy-analysis/despite-houthi-pledge-limit-attacks-red-sea-remains-highly-volatile.