Houthi Missile Escalation Against Israel Marks New Regional Tensions
Executive Summary
Yemen’s Houthi movement has intensified its missile and drone attacks on Israel, disrupting Red Sea shipping lanes and regional trade. The ongoing conflict, exacerbated by Houthi ballistic missile launches and Israeli retaliatory strikes, has drawn international scrutiny. In parallel, Egypt faces a dire economic crisis as Suez Canal revenues plunge by over $7 billion, due in part to rerouted shipping traffic around the Red Sea. The multifaceted crisis underscores the strategic challenges posed by the Houthis, Iran's regional proxies, and escalating instability in the Middle East.
Analysis
Houthi Missile Strikes on Israel
Yemen's Houthi group has emerged as a central actor in the Israel-Gaza conflict, aligning itself with Hamas and targeting Israel with advanced ballistic missiles and drones. The Houthis claimed responsibility for a recent attack on Israel’s Nevatim Air Base using a hypersonic "Palestine 2" missile. While Israel’s multi-layered defense systems, including the U.S.-deployed THAAD, intercepted the missile, the attacks demonstrate the Houthis' growing technological capabilities, likely bolstered by Iran.
Since October 2023, the Houthis have launched over 200 missiles and 170 drones toward Israel, disrupting daily life and triggering alarms across the country. Israel has responded with targeted airstrikes on Houthi infrastructure in Yemen, including ports, airports, and power stations. Despite these efforts, the Houthis remain resolute, linking their attacks to solidarity with Palestinians in Gaza.
Impact on Red Sea Trade and Suez Canal Revenues
Houthi missile and drone attacks on Red Sea shipping have led to a significant shift in maritime traffic, as many shipping companies reroute vessels around the Cape of Good Hope. This diversion has devastated Egypt’s Suez Canal revenues, resulting in a staggering $7 billion loss—a 60% drop from 2023.
The Suez Canal, a critical global trade artery handling 12% of international commerce, is vital to Egypt’s fragile economy. The Red Sea disruptions come amid soaring inflation, a collapsing currency, and a cost-of-living crisis affecting millions of Egyptians. This economic downturn has intensified political instability, with President Abdel Fattah el-Sisi facing growing public discontent in the shadow of regional upheavals, such as the fall of Syrian President Bashar al-Assad.
Strategic Challenges and Global Implications
The Houthi attacks underscore Yemen's strategic importance, particularly its control over the Bab el-Mandeb Strait, a chokepoint for global trade. Disruptions here threaten not only regional players like Israel, Saudi Arabia, and Egypt but also global commerce and energy supplies.
The broader implications extend to Israel’s regional strategy. While Israeli Defense Minister Yoav Gallant has vowed to "eradicate" the Houthi threat, the Houthis’ resilience complicates efforts to stabilize the Red Sea corridor. Furthermore, Egypt's economic struggles compound the region's fragility, with reduced Suez Canal revenues adding pressure on other critical sectors like tourism and remittances.
Houthi Alignment with Iran and Regional Dynamics
Iran’s support for the Houthis has elevated them from a regional militia to a strategic proxy capable of striking Israel and disrupting maritime security. The group's advanced weaponry, including ballistic and cruise missiles, highlights Tehran’s broader ambitions to challenge Sunni Arab states and Israel.
Israel’s intensified airstrikes on Yemen reflect a strategic shift to neutralize this growing threat. However, these operations come with risks, as heightened Houthi retaliation could further destabilize the region and jeopardize international shipping.
Egypt’s Political Instability and Economic Crisis
The collapse of Suez Canal revenues has magnified Egypt’s economic woes, with inflation and currency devaluation eroding public confidence in Sisi’s leadership. His defensive rhetoric, coupled with the regime’s brutal repression of dissent, underscores the fragility of his rule.
The economic fallout from the Red Sea crisis, coupled with growing political unrest, raises questions about Egypt’s ability to maintain stability. International actors, including the U.S. and Gulf states, may face increasing pressure to intervene diplomatically or economically to avert a broader collapse.