A conflict that began in Gaza is increasingly affecting container ships thousands of kilometres away. Yemen’s Houthi movement has launched missiles and drones towards commercial vessels travelling through the Red Sea and has seized at least one ship, saying its campaign is intended to pressure Israel over the war in Gaza. Several of the world’s largest shipping companies have responded by suspending or rerouting some Red Sea voyages, sending vessels around the Cape of Good Hope instead of through the Bab el-Mandeb Strait and Suez Canal. The United States has announced a multinational maritime security operation intended to protect commercial navigation. A regional armed movement that cannot remotely match the military or economic power of the countries affected has nevertheless created a problem for global trade because power depends not only on how many resources an actor possesses, but on where those resources can be applied.
The geography is unusually important. Ships travelling between Asia and Europe can move through the Indian Ocean, pass the narrow Bab el-Mandeb Strait between Yemen and the Horn of Africa, cross the Red Sea and continue through Egypt’s Suez Canal into the Mediterranean. This route dramatically reduces the distance between Asian manufacturing centres and European markets compared with sailing around southern Africa. Roughly 12% of global trade normally passes through the Suez Canal, alongside significant volumes of container traffic and energy shipments. The canal therefore acts as one of the principal arteries connecting Asian and European production networks.
This creates what economists and security analysts call a chokepoint. The global economy may contain millions of firms and enormous redundancy in individual products, yet transportation between those firms can become concentrated geographically. Panama, Suez, Bab el-Mandeb, the Strait of Hormuz and the Strait of Malacca therefore possess economic importance far greater than their physical size suggests. Geography creates concentration even when markets themselves are decentralised.
The Houthis have discovered the strategic value of that concentration. They do not need enough naval power to defeat the United States or control the entire Red Sea permanently. They need enough missiles, drones and uncertainty to change the expected cost of sailing through one narrow corridor. If shipping companies believe there is a meaningful probability that a vessel worth tens of millions of dollars and carrying hundreds of millions in cargo could be attacked, insurers raise premiums and companies reconsider routes.
This is asymmetric coercion through risk. The Houthis do not need to sink every vessel. They do not even need to hit most vessels. They need commercial actors to believe the probability of attack has increased enough that avoiding the area becomes economically rational.
That distinction explains why relatively inexpensive weapons can generate disproportionately large costs. A drone costing perhaps thousands or tens of thousands of dollars can force a commercial vessel worth vastly more to change course. Naval forces then deploy warships and expensive air-defence missiles to intercept relatively cheap projectiles. The attacker therefore creates an unfavourable cost-exchange ratio for the defender.
Modern warfare increasingly contains this asymmetry. Ukraine has used relatively inexpensive drones against much more expensive Russian military equipment. Russia has used Iranian-designed Shahed drones to force Ukraine to expend air-defence resources. The Houthis are applying a similar economic logic against commercial shipping.
Technology is reducing the amount of capital required to impose disruption.
This does not mean sophisticated militaries have become irrelevant. American and allied naval forces possess vastly greater surveillance, interception and strike capabilities than the Houthis. The difficulty is that the objective is not simply defeating an opposing military unit. It is maintaining enough security across a large maritime area that private companies believe sailing through it remains commercially rational.
Military control and commercial confidence are different thresholds.
A navy can intercept most attacks and still fail economically if the residual risk remains high enough for shipping companies to reroute.
This is why private actors become important participants in geopolitical crises. Governments can announce that a shipping lane is open. Maersk, MSC or another carrier still decides whether its vessels use it. Insurance companies decide how risk is priced. Crews and shipowners evaluate safety. The functioning of the trade route therefore depends on thousands of decentralised commercial decisions rather than a government declaration alone.
Markets become geopolitical actors because expectations change physical behaviour.
The alternative route demonstrates the economic cost. Sailing from Asia to Europe around the Cape of Good Hope can add thousands of nautical miles and roughly one to two weeks to voyages depending on origin and destination. Ships consume more fuel, crews remain at sea longer and the same vessel completes fewer journeys each year.
This effectively reduces global shipping capacity even though no ships have disappeared.
If a vessel previously completed ten trips in a period and longer routes reduce that to eight, the world’s usable transport capacity has fallen without a single container ship being destroyed.
This is a time-capacity effect.
Time itself becomes an economic input.
Longer journeys increase inventory requirements because goods spend more days between producer and customer. Companies need more working capital tied up in products travelling across oceans. Delivery schedules become less predictable. Manufacturers depending on precisely timed inputs may need larger inventories.
The disruption therefore challenges another feature of modern globalisation: just-in-time production.
For decades, firms reduced costs by minimising inventories and coordinating supply chains precisely. Warehouses containing unused components appeared inefficient. The pandemic demonstrated that extremely lean systems become fragile when transport networks fail.
The Red Sea is another reminder that efficiency and resilience are not identical.
A supply chain designed around the shortest route is efficient when the route remains available.
A supply chain containing alternative suppliers, larger inventories and several transport routes costs more during normal periods but performs better during disruption.
This is exactly the de-risking argument the G7 adopted earlier this year.
The same principle applies to geography.
Countries and firms increasingly need to ask not only “where is production cheapest?” but “how many politically vulnerable nodes connect that production to us?”
This is sometimes described as geoeconomic exposure.
A European company importing components from Asia may possess diversified suppliers across several countries and still discover that almost all shipments pass through the same maritime chokepoint.
Supplier diversification without transport diversification can therefore create an illusion of resilience.
The Suez route is particularly difficult to replace because geography provides no equivalent nearby alternative. Ships can sail around Africa, but that route is substantially longer. Rail connections across Eurasia exist but cannot absorb anything close to global maritime volumes and face their own geopolitical problems, particularly after Russia’s invasion of Ukraine.
Infrastructure can reduce geographical constraints.
It rarely abolishes geography.
This is why Egypt also has an enormous economic interest in restoring normal navigation. The Suez Canal generates billions of dollars in annual revenue for the Egyptian state. Ships diverting around Africa therefore do not merely increase costs for European and Asian companies; they reduce foreign-currency earnings for an Egyptian economy already facing severe financial pressure.
One armed group’s actions in Yemen can therefore affect Egypt’s fiscal position.
That is an extraordinary example of cross-border economic externality.
The Houthis do not bear most of the economic costs they create.
Shipping companies, consumers, insurers, Egyptian taxpayers and businesses across Asia and Europe do.
This is what makes chokepoint disruption such an attractive strategy for weaker actors. The attacker concentrates relatively limited resources at one location while distributing costs across an enormous number of outsiders.
The ratio between resources spent and costs imposed can become extremely favourable.
Economic coercion therefore does not require economic size.
It requires leverage.
Iran understands this mechanism particularly well. The Houthis are part of a broader network of Iranian-aligned armed organisations across the Middle East, alongside Hezbollah in Lebanon and militias operating in Iraq and Syria. Iran provides the Houthis with varying forms of support, although treating every Houthi decision as though Tehran directly commands it would oversimplify the relationship.
The network gives Iran a form of distributed regional influence. Pressure can be applied through several armed actors without requiring Iran itself to enter direct conventional war with the United States or Israel.
That creates strategic ambiguity.
How much responsibility belongs to the local organisation?
How much belongs to Tehran?
At what point does retaliation against the proxy become retaliation against the sponsor?
Those questions make escalation management harder.
The United States faces precisely that dilemma. It wants to protect commercial shipping and maintain freedom of navigation without allowing the Gaza war to expand into a much larger regional conflict. Striking Houthi launch sites might reduce military capability but could escalate American involvement in Yemen and potentially strengthen the Houthis politically by allowing them to present themselves as directly confronting the United States.
Doing nothing creates the opposite problem.
If attacks successfully close or substantially disrupt a major international shipping route without meaningful consequences, the strategy becomes more attractive for future coercion.
Again, deterrence requires balancing cost imposition against escalation control.
Operation Prosperity Guardian attempts an intermediate strategy: multinational naval protection rather than immediate large-scale offensive action. The objective is to reduce the probability that attacks succeed and thereby restore commercial confidence.
Whether that works depends partly on economics rather than military statistics.
If naval forces intercept 95% of attacks but shipping companies still consider the remaining 5% too dangerous, the military operation can be tactically successful while the economic objective remains unmet.
This is why deterrence needs to change expectations, not merely destroy weapons.
The Houthis’ stated justification adds another layer. They describe the attacks as pressure on Israel over Gaza and have claimed they are targeting Israeli-linked shipping. The actual commercial relationships surrounding global vessels are extraordinarily complicated. A ship can be registered in one country, owned by a company in another, managed from a third, insured elsewhere, crewed internationally and carrying cargo belonging to firms across dozens of states.
The concept of an “Israeli-linked ship” therefore becomes elastic quickly.
That elasticity increases risk because commercial actors cannot easily know whether the Houthis will consider their vessel a target.
Uncertainty itself becomes part of the coercive mechanism.
This is another reason the attacks cannot simply be treated as an extension of legitimate political protest over Gaza. International humanitarian concern does not create a general right to attack commercial vessels or crews unrelated to the conflict. Many seafarers travelling through the Red Sea have no connection to Israeli government policy whatsoever.
Collective responsibility remains dangerous regardless of who invokes it.
A Filipino or Indian crew member aboard an internationally owned container ship does not become a legitimate target because somebody can identify an indirect commercial connection to Israel.
The Gaza war is nevertheless demonstrating how regional conflicts propagate through networks. Fighting occurs in a relatively small territory. Political mobilisation extends across the Middle East. Armed groups in Yemen attack ships. Insurance markets in London adjust prices. European importers reconsider logistics. Egyptian canal revenue comes under pressure.
Modern interdependence transmits geopolitical shocks almost like a financial system transmits banking shocks.
The network creates prosperity during normal periods.
It creates channels of contagion during crisis.
This is the central paradox of globalisation.
Connections make systems more productive and more interdependent simultaneously.
The answer cannot simply be reducing every connection. Autarkic economies would sacrifice enormous gains from trade and remain vulnerable to domestic shocks.
The more rational objective is network resilience.
Several suppliers.
Several transport routes where possible.
Strategic inventories.
Insurance.
Naval protection of genuinely unavoidable chokepoints.
Infrastructure capable of absorbing temporary disruption.
Resilience therefore means accepting some inefficiency during normal periods in exchange for lower catastrophic loss during abnormal ones.
Markets often underinvest in that resilience because individual firms do not capture all the benefits. A company choosing the cheapest shipping route saves money directly. Maintaining alternative capacity can benefit the wider economy during crisis.
This creates a role for governments.
Strategic reserves, infrastructure investment and maritime security are public goods because their benefits extend beyond whichever company pays for them.
The Red Sea therefore demonstrates why the state remains important even inside a highly globalised private economy.
Governments do not operate most container ships.
They maintain the security environment in which container shipping becomes possible.
Freedom of navigation is an economic institution backed ultimately by military capacity.
This is uncomfortable because globalisation is often described as though markets gradually replaced geopolitics. In reality, markets expanded partly because geopolitical conditions made trade routes predictable.
The post-1945 maritime order allowed commercial shipping to assume that major sea lanes would usually remain open.
That assumption became embedded in prices.
When security deteriorates, the hidden value of the assumption becomes visible.
Shipping costs rise because security was never free.
It was simply priced close to zero while somebody else provided it.
This is another example of the value of prevention being invisible until prevention fails.
Navies patrolling shipping lanes appear expensive when nothing happens.
Once attacks begin, the economic value of secure navigation becomes easier to calculate.
The same principle applies to defence expenditure more broadly.
Military capacity often produces its greatest benefit through wars that do not occur and trade routes that remain open.
That makes democratic budgeting difficult because citizens see expenditure while the counterfactual benefit remains invisible.
The Houthis have made part of that benefit visible this month.
The longer-term question is whether this episode accelerates the regionalisation of globalisation. Companies have already begun reconsidering supply chains after COVID-19, US-China competition and Russia’s invasion of Ukraine. Another major transport disruption strengthens the argument for producing goods closer to final markets or maintaining larger inventories.
But reshoring everything would be enormously expensive.
The more likely outcome is selective diversification.
Strategic goods may receive more redundant supply chains.
Ordinary consumer products will continue moving through whichever routes remain cheapest.
Companies will purchase more resilience where disruption costs justify the premium.
Again, de-risking rather than decoupling.
India could benefit from this transformation while also remaining vulnerable to it. Its location gives it direct access to the Indian Ocean and makes it potentially important to new trade corridors connecting Asia, the Gulf and Europe. The India–Middle East–Europe Economic Corridor announced at the G20 was partly designed around creating additional connectivity between these regions.
The current Gaza war makes that project’s political assumptions more complicated because the corridor depends partly on cooperation across states whose regional relationships are now under greater pressure.
Infrastructure maps often assume politics remains constant.
Politics rarely cooperates.
This is why geopolitical infrastructure needs to be evaluated not only according to construction cost but according to political durability across every jurisdiction it crosses.
A route passing through five countries has five potential political failure points.
Connectivity creates efficiency.
Every connection creates another dependency.
The Houthis’ leverage comes from understanding that dependency intuitively.
They do not need to dominate the international system.
They need to impose uncertainty at one place where the international system becomes physically narrow.
That is the hidden geography beneath supposedly borderless globalisation.
Digital finance moves almost instantly.
Container ships still need water.
Oil still passes through straits.
Canals still have physical widths.
Geography therefore survives technological change.
In some ways, technology makes geographical chokepoints more vulnerable because cheap drones and missiles allow weaker actors to threaten infrastructure that previously required substantial conventional military power to disrupt.
The democratisation of precision strike can therefore create a strange form of geopolitical decentralisation.
More actors can impose costs previously available mainly to states.
That has implications far beyond Yemen.
Ports.
Pipelines.
Undersea cables.
Energy terminals.
Shipping lanes.
Modern economies depend on physical nodes whose strategic value is enormous relative to their geographical size.
Protecting them will become increasingly important as weapons capable of threatening them become cheaper.
The Red Sea crisis therefore should not be understood simply as another front in the Israel-Hamas war.
It is a demonstration of how twenty-first-century power can operate.
The Houthis are militarily weak compared with the United States.
Economically, they are insignificant compared with the countries whose trade they are disrupting.
Yet power is relational.
A small actor can become powerful when it controls or threatens something much larger actors need.
Globalisation increased efficiency by concentrating trade along the cheapest routes.
That concentration created leverage for whoever can disrupt them.
The world built an extraordinarily productive network.
Networks have nodes.
Nodes can be attacked.
The Houthis cannot control global trade.
They have discovered that threatening one sufficiently important junction can make global trade respond to them anyway.
