Are Houthis Red Sea attacks hurting Israel’s economy?

Tensions in the Red Sea have spilled over onto Yemeni soil as the United States and the United Kingdom led airstrikes against multiple locations controlled by the Houthi armed group on Thursday night.

The Houthis have executed numerous attacks on commercial vessels, claiming connections to Israel, navigating through the 30km (20-mile) wide Bab-el-Mandeb strait. Their demands include Israel ceasing the bombardment of Gaza and permitting humanitarian aid. A US-led coalition is countering Houthi actions by deploying destroyers and military platforms in the Red Sea, intercepting the Yemeni group’s missiles and drones. Despite these efforts, the Houthis remain resolute in their stance until Israel concludes its war, resulting in almost 24,000 Palestinian casualties.

The Red Sea’s traffic has plunged by over 40 percent, disrupting global supply chains. Major shipping operators have rerouted vessels around the Cape of Good Hope in southern Africa, leading to delayed deliveries and an additional 3,000-3,500 nautical miles (6,000 km) to their routes.

The impact of Houthi attacks on Israel’s economy and global trade raises critical questions. The Houthis have targeted at least 26 vessels since seizing the Israeli-linked Galaxy Leader vessel in November. US warships have thwarted additional attacks, prompting condemnation from the UN Security Council.

The Red Sea, a crucial maritime route linking Asia to Europe and the Mediterranean through the Suez Canal, witnesses around 50 ships daily, carrying cargo valued between $3 billion to $9 billion. Container shipping is severely affected, but data suggests minimal disruption to oil tanker passage.

While direct impact on Israel’s economy is limited, prolonged disruptions may pose greater risks. Israel’s aspirations to become a Liquid Natural Gas (LNG) exporter face challenges due to heightened political risks. Gabrielle Reid of risk consultancy S-RM highlights that hostilities jeopardize Israel’s position in global natural gas markets, hindering its potential as a significant player in the Eastern Mediterranean region.