MS Risk Blog

The Houthi-Western Escalation

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Key Judgment: Within the next six (6) months, it is highly likely that we will continue to see disruption to commercial shipping in the Red Sea by the Houthi rebels.

Due to the conflict between Israel and Hamas, the Houthi’s, a Shia Islamist rebel group backed by Iran who control Western Yemen, announced on the 19th of October 2023 that all ships associated with Israel that operate in the Red Sea area will be targeted in offensive, disruptive attacks. Whilst this was the initial statement from the Houthi’s, they have since used this a guise to justify attacks on all commercial ships that operate in the area, severely disrupting global trade routes. The Red Sea and Bab el Mandeb Strait make up roughly 12% of world trade and 30% of global container traffic. An estimated 4.5 million barrels of oil pass through this region every day, and shipments of liquified natural gas along the route in the first half of 2023 came to around eight percent of the commodity’s trade globally. About 95% of the vessels that operate through these regions have rerouted around Cape of Good Hope, the only alternative shipping route, adding 4,000-6,000 nautical miles and 14-20 days to journeys. This has added supply chain stress, as well as incredible hikes in insurance and freight shipping costs as a result, with some experiencing 600% increases in these costs.

As a result of the Houthi disruption of freedom of navigation of commercial shipping, and the economic stress caused by these actions, the US and the UK responded on the 11th of January 2024 with joint airstrikes on Houthi drone, radar, and weapon sites. The aims of the strikes being to disrupt Houthi capabilities to further impede freedom of navigation. Following these strikes, the Houthi’s conducted 12 attacks on commercial shipping in the Red Sea, resulting in a second joint air strike between the US and UK on Houthi positions on the 22nd of January. This demonstrates the West’s commitment to fighting against the Shia agenda in the Middle East. Prior to the US-UK led air strikes, Western nations launched Operation Prosperity Guardian on 18th December 2023 to support and maintain maritime security, with interceptions of missiles targeting US/UK Navy or commercial ships being a daily occurrence since the beginning of January.

Whilst the Houthis have built up their arsenal largely through the absorption of Yemeni military equipment, Iran are the primary financers of the Houthis. Utilizing complex smuggling networks within the Middle East and Africa, Iran has provided them with everything from small arms to long range ballistic missiles to further their strength. Iran are also the primary supporters of Hezbollah, a Lebanese Shia Islamist militant/terrorist group, as well as Hamas, a Sunni Islamist militant/terrorist group. Both groups, alongside the Houthis, have ramped up the scale of their attacks on Israel and Western forces since the beginning of the conflict on October 7th, 2023. Iran also supports Shia militia groups in Iraq and Syria, which have been targeting US military bases in these regions throughout December 2023 and January 2024. Iran, who has been isolated by the West through severe sanctions in the last decade, sees an opportunity to reestablish power in the region by capitalizing on the tensions and escalating conflict levels via their proxy actors. This emboldening of Iran lines up well with the timing of increasing tensions in Europe with Russia, and in South-East Asia with China. As a result of this, it appears likely that Iran will maintain this strategy to take advantage of the division of Western power and attention.

In conclusion, the escalation of conflict in the Middle East between Iranian proxies and Western powers appears to be a calculated move to take advantage of the global tensions and the distraction of the West. By controlling the Red Sea area, Iran and the Houthi’s increase their bargaining power, and their influence on Western agenda. As a result of this, it is highly likely that disruption of commercial shipping in the region will persist for the next 6 months, and it is highly likely because of this that we will see continued offensive actions by US-UK led Western powers into Houthi territories.