Houthi Attacks on Shipping Could Spark Supply Chain Crisis

Industry analysts warn that the recent missile and drone attacks by Houthi militia on merchant ships passing through the Red Sea and Gulf of Aden could have serious consequences for global supply chains.

Since the start of the Israel-Hamas war in October, the Yemen-based Houthis have targeted around a dozen ships in the critical maritime chokepoint leading to the Suez Canal. Maersk, the world’s second largest shipping line, has already paused voyages through the region following an attack on one of its ships.

Experts believe that further escalations could potentially lead to the closure of the Suez Canal, disrupting supply chains and causing chaos similar to the Ever Given incident in 2021.

Peter Sand, Chief Analyst at Xeneta, a leading ocean freight shipping data and intelligence platform, says that while a closer of the Suez Canal is unlikely, it cannot be ruled out.

“All ships transiting the Suez Canal must sail through the Red Sea and Gulf of Aden and the Houthi militia has made clear that any vessel is a target,” said Sand. “I do not believe the Suez Canal will close, however, if there are further significant escalations then we cannot rule it out, even if it is just for a few days.”

The Suez Canal is a vital route for more than 50 vessels daily, carrying billions of dollars’ worth of goods to North Europe, the Mediterranean, and the North America East Coast. With ongoing restrictions in the Panama Canal due to drought, the recent attacks in the Suez Canal come at a particularly challenging time for the ocean shipping industry.

As a result of the attacks, shipping companies are already rerouting vessels away from the Red Sea and Gulf of Aden region. However, rerouting through the Cape of Good Hope adds up to 10 days of sailing time, causing delays in services from Asia to North Europe and the East Mediterranean.

“Due to the importance of the Suez Canal to global supply chains, even a small disruption can have big consequences,” Sand said.

“We may also see the cost of moving freight by ocean increase dramatically. Depending on the scale and duration of any disruption at the Suez Canal, we could see ocean freight shipping rates increase by anything up to 100%,” he added.

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