The Houthis created significant concerns in Israel's economic system. Their control over the Gulf of Aden and the Bab el-Mandeb Strait threatened one of Israel's main shipping routes through the Red Sea and Suez Canal. Houthi attacks on merchant vessels led to the diversion of international shipping to a longer route, circumnavigating Africa via the Cape of Good Hope. In Israel, there were fears of dramatic effects on our global trade that would lead to price increases for many products.
This concern was certainly well-founded. Rising shipping costs during the COVID-19 crisis were a major factor in the global increase in consumer product prices. The blocking of the Suez Canal between 1967 and 1975 also caused significant damage to Israel's international trade and economic growth.
However, a new study by the Bank of Israel, conducted by Haggay Etkes and Nitzan Feldman, shows that the Houthis' impact was relatively limited. From the start, only about 5% of Israeli exports are shipped by sea to Asia and Oceania, and about 20% of civilian imports to Israel. The analysis revealed that total Israeli imports from Asia and Oceania did not decline unusually following the Houthi attacks. Import prices to Israel also did not rise significantly, partly because maritime shipping costs are a small portion of the merchandise price, so their impact on the final price is minimal.
The Houthi attacks in the Red Sea didn't only affect Israeli vessels or those bound for Israel but impacted global maritime transport worldwide. Other Mediterranean countries actually felt the impact of these attacks more strongly. Imports in countries like Greece, Turkey, Italy, France, and Spain declined for six months due to Houthi attacks but managed to recover by the spring of 2024. The diversion of shipping routes initially raised transport costs, but this increase moderated within several months. Ironically, Israel, which was the declared target of Houthi attacks, showed reduced impact compared to other Mediterranean coastal nations.
It's no wonder the Houthis themselves are beginning to worry. The Shiite axis is crumbling across the Middle East, and their harmful influence on a major maritime trade route is weakening as the world finds alternative solutions and demonstrates flexibility in shipping routes. The Houthis remain alone in the broader Iranian campaign, where they weren't the strongest player to begin with. This week, the US and Britain attacked a Houthi facility in Sanaa, and later, Israel also struck several targets in Yemen, while the emerging Trump administration is not expected to treat them favorably.
