Across a wide range of shipping routes, the Red Sea corridor remains the most sensitive artery for global trade. The region has been tense since last November, when Houthi forces operating from Yemen began targeted actions against merchant traffic near the strait. Their strikes, aimed at supporting operations in Gaza, have disrupted the passage of dozens of vessels and reshaped how companies move goods between Europe, Asia, and beyond. The consequences are noticeable in rising costs, longer wait times, and growing unease among the United States and its partners about the risk of a broader spillover into war. While both sides show little appetite for a direct, full-scale confrontation, the current fragility in the Red Sea continues to influence global markets and shipping security concerns.
About 85 percent of world trade travels through the Suez Canal region via the Red Sea, with the remaining 15 percent using alternative routes. The broader waterway connects the Mediterranean to the Indian Ocean, stretching from the northern entry near Europe to the southern approach at Bab al-Mandeb. The aim is clear: shorten voyage times between Europe and Asia by sea. The region transports a substantial share of grain, energy, and industrial inputs, including oil and liquid gas. Today, however, it also carries a heightened risk profile, as legitimate shipping lanes face increased disruption from armed actions, drones, and speedboats in the hands of non-state actors aligned with regional actors. The fear is that disruptions will escalate, possibly affecting insurers, freight rates, and the appetite for long-haul supply chains.
Attacks on merchant ships have drawn attention from port authorities, insurers, and industry leaders. From the International Chamber of Shipping, concerns were voiced about how fragile the route has become for global commerce. It is often said that nearly half of trade between continents travels by container across the Red Sea, covering vehicles, electronics, raw materials, and everyday goods. The risk is not abstract: a major interruption could trigger broader economic effects and ripple through manufacturing schedules and consumer prices. Analysts emphasize that even if a direct collision between major powers remains unlikely, the disruption to shipping lanes could exert prolonged pressure on global economies.
Alternative routing considerations
In response to the current risk, many large international carriers have begun rerouting to avoid the Bab el Mandeb Strait. The list reads like a who’s who of freight and energy players, including major names from Denmark, Maersk, and Germany’s Hapag-Lloyd, along with energy firms impacting crude and refined products. By late December, traffic through the strait had fallen significantly, according to industry trackers, and cargoes are increasingly diverted toward circumnavigating the African continent via the Cape of Good Hope. That detour adds days to voyages and increases fuel costs, insurance premiums, and overall freight spend. It is a costly but safer option for preserving supply chain reliability in the near term.
Experts note that the higher freight and insurance costs are unlikely to reverse quickly. Yet, they also suggest the impact on consumer prices will be incremental, with longer-term adjustments depending on how markets and producers adapt. Freight rates can still be relatively favorable in some lanes, but the risk premium has risen. The change in routing patterns affects not only shipping lines but manufacturers who rely on timely deliveries of tires, rubber, and other inputs. This is forcing companies to rethink inventory strategies and procurement timelines as they navigate the new normal. Pandemic-era lessons about supply chain resilience remain relevant, even as the immediate pressures ease in some segments.
Historical context
Historically, the region has often used leverage over crude flows to influence broader geopolitical dynamics. In past eras, embargoes and strategic choke points have created pressure on economies that depend on steady energy supplies. The present situation echoes that pattern, though the tools and players are different. The ongoing conflict linked to Gaza has already caused diplomatic strains and shifts in regional alliances. While drastic moves such as closing major waterways are unlikely, the possibility of escalations keeps market participants vigilant and cautious about the risks to supply chains and energy markets.
Coalition and policy response
The United States has signaled a readiness to reduce disruption at sea. A coalition of nations has been mobilized to patrol critical entry points and deter unlawful attacks near the Red Sea. Officials have warned that those who attack civil shipping will be held accountable for the consequences. At the same time, there is a broader objective to prevent the Gaza crisis from widening and destabilizing the region further. The balance between securing safe passage and avoiding a wider war remains a delicate political calculation, with many factors influencing decisions on the ground and in diplomatic channels.
There is also a focus on regional stability, including discussions about reducing tensions along borders and avoiding actions that could trigger a broader confrontation. The risk premium associated with energy shipments persists, underscoring the interconnected nature of security, geopolitics, and trade. Market observers expect that the broader effects of any major disruption would unfold gradually, shaping trade flows and investment decisions across the Atlantic and beyond.