The Huthis have repeatedly stated they are committed to continuing their
military operations until Israel stops the genocide and siege on Gaza
Maritime security lacking, attacks resume
Moves to improve maritime security in the area were launched by the USA - Operation Prosperity Guardian - in December 2023, while the European Union launched Operation Aspides
in February 2024. However, the US operation ended in May this year,
following a ceasefire between the US and the Huthis, while the EU
mission reportedly has only two or three frigates and some aircraft, providing minimal security given the area needed to be covered.
Despite the dwindling maritime protection, there were no attacks in
the first several months of 2025, causing a slight boost in cargo ship
activity. The more subdued environment, and the significant loss of
revenues, prompted Cairo in May (2025) to offer a 15 percent discount on fees to transit the Suez Canal for ships with a tonnage of at least 130,000 metric tonnes to try to bolster activity.
But in July, two carriers were attacked
by Huthi drones and sunk, and four sailors killed. The renewed attacks
scotched an expected rebound in Red Sea activity, and prompted container
costs to reach $3,560/FEU by early July, around 50 percent more than in
late May, according to Freightos, while war risk premiums rose from around 0.3 percent of the value of the ship to 0.7 percent, according to Reuters.
The outlook
The crisis had led to a 10 percent rise in demand for container
ships, but as more shipping capacity has been added over the past year,
container rates on major Asia-Europe lanes fell in late August by 7
percent to $2,841/FEU, below the pre-crisis rates. ‘This
counterintuitive trend strongly suggests that fleet growth is now the
dominant factor in the market, outweighing the impact of longer transit
time’, noted Israel-based digital freight booking platform Freightos.
‘As we move toward the final quarter of 2025, the Red Sea situation has
evolved from an acute crisis to a persistent market reality’.
There is of course significant uncertainty over the future outlook,
and how Yemen and Israel will react as tit-for-tat attacks continue, and
Israel carries out its ground offence to occupy Gaza City. In late
August the Israelis carried out a major air strike on Sanaa, killing 12 out of 16 Huthi ministers,
including the prime minister and foreign minister. In response, the
Huthis fired a missile at a Liberia-flagged, Israeli-owned tanker ‘Scarlet Ray’ in
early September, and two weeks later, the Israelis carried out attacks
on Yemen’s Hodeidah port. The attack on the tanker, just 40 nautical
miles off the Saudi port of Yanbu, a major export hub for Saudi Aramco,
has caused concern in Riyadh about securing key logistical
infrastructure.
This crisis is very different from the Horn of Africa piracy crisis
that peaked in 2011, and prompted a global maritime security response,
being more politically driven than economic. In that sense, it has
echoes of the 1973 OPEC oil embargo, but is causing less economic pain,
as the embargo caused global oil prices to triple while the impact of
this crisis is less evident. Indeed, estimates
for 2024 show that the Red Sea crisis added up to 0.7 percentage points
to global core goods inflation, while other factors have caused a far
higher rise in inflation for many countries.
But even if the Gaza war ends soon, presenting a reason for the
Huthis to de-escalate or cease attacks in the Red Sea, analysts expect
it will take months before insurance premiums drop and the route can be
considered fully open again, while there is still piracy off the Horn of
Africa to contend with.
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