Western warships are shooting down Houthi threats, but the Iran-backed attacks are still screwing up global trade

• Houthi militias from Yemen are targeting commercial cargo vessels in the Red Sea.
• The attacks prompted major companies including BP to stop or reroute all shipments in the region.

As Iran-backed Houthi militias continue targeting commercial vessels in the Red Sea with drone and missile attacks, causing multiple major companies to reroute or cancel shipments through the region, economists worry the massive disruption to global trade will have a sharp impact on the world economy.

The US, as well as French and UK allies, have been fending off a barrage of Houthi attacks for nearly two months, intercepting over a dozen drone attacks in a single day this past weekend as they protected the commercial ships.

Representatives for the Iran-backed rebel group have pledged to continue the attacks against ships that are in any way associated with Israel, in support of Hamas, per the international affairs think tank, the Atlantic Council. But the attacks in recent days have not been so precise, per PBS, as several strikes have hit vessels with no known ties to Israel.

Despite a multinational show of forces to defend ships passing through the Red Sea and Suez Canal, four of the world's five largest container shipping companies including Maersk, CMA CGM Group, and Hapag-Lloyd, as well as oil giant BP have temporarily halted shipments through the region in a move experts warn could have impacts on the global economy.

"Rising uncertainty in the Suez channel combined with the global economy rebounding because of easier financial conditions could put upward pressure on goods inflation over the coming months," Torsten Slok, the chief economist of Apollo Global Management, said, according to Bloomberg.

As the Houthi attacks force big businesses to stop shipments through the Red Sea, some are instead attempting to travel through alternate routes — but there aren't many options in the area. Attempting to navigate to the world's other major trading shipping route, through the Panama Canal, also presents a problem because it is severely restricted due to drought.

A backup in seaborne traffic through the Panama Canal, caused by ships being rerouted from the Suez channel, could further exacerbate costly shipping delays and likely result in rising prices for customers on the receiving end of the goods being delivered.

"The situation does mean an increase to shipping costs and some short-term delivery delays," Henning Gloystein, a director at researcher Eurasia Group, told Bloomberg. "All these costs will be directly passed on to consumers."

The Wall Street Journal's editorial board wrote in an opinion essay published Sunday worrying that the continued attacks and subsequent shipping delays will bring "major economic consequences" if they continue.

Those economic impacts appear to be a significant factor behind the military strategy of Western nations, who have banded together to protect the commercial interests sailing through the canal.

On Monday, The Journal reported that the Pentagon announced a new international effort to combat the attacks in the Red Sea, called Operation Prosperity Guardian, combining forces from the US, UK, Norway, France, and Bahrain to push back on the Houthi attacks and offer a military escort for commercial vessels passing through the region.

Though a security escort will help cargo ships move through the canal without being attacked, it will result in further delays as commercial vessels are forced to wait for help for safe passage.

Shipping costs and other supply chain issues contributed to inflationary prices during the pandemic. In January of 2023, The Economist reported that shipping costs had returned to pre-pandemic levels.

It's unclear how much the current situation will impact shipping in the long term.

"Geopolitics is showing its ugly face and shipping has been taken as a hostage," The Journal reported Peter Sand, chief analyst at shipping platform Xeneta, said.