A new report reveals: how much did the Houthis really hurt Israel?

Despite many concerns for commodity traffic jams, as was the case in the years immediately after the Corona crisis, the blocking of the Bab al Mandav straits by the Houthi regime in western Yemen does not create particularly large damages, according to a new study by the Bank of Israel conducted by Hagai Attax and Nitzan Feldman (School of Science State, Haifa University) transportation prices have increased, but these increases have moderated dramatically in the last six months due to the impressive flexibility of the global system and the diversion Effective resources by the shipping companies. In addition, the impact on Israel is marginal to non-existent – due to Israel’s intense trade with Europe that is not affected by the blockade of the straits, and early preventive actions that softened the blow over time.

Following the start of the war in Israel in October 2023, the Houthi regime that controls western Yemen and is supported by Iran also joined the attacks on Israel. But beyond launching ballistic missiles from the southern tip of the Arabian Peninsula, the Houthis have also blocked the Bab al-Mandab straits to the movement of most ships. The strait is the only way to reach the Suez Canal which connects the Indian Ocean to the Mediterranean Sea and saves all of Africa’s coffee through the Cape of Good Hope. Due to the recent experience of the severe goods traffic jam during the Corona period, which boosted transport prices 10 times, there is a fear of a new goods traffic jam that will increase the cost of living and even hinder economic growth, as actually happened following the closing of the Suez Canal in the 1960s and 1970s.

Trade was diverted to alternative routes

But despite an almost 6-fold jump in transportation prices on the Shanghai-Genoa route, which normally passes through the Bab al-Mandav straits, prices have dropped significantly in the last six months to “only” 2 times their price on the eve of the war. Because transportation prices are only a small part of commodity prices, this means that the effect on the cost of living is relatively negligible. Trade has been diverted to alternative routes, mainly those that circle Africa, and although such a route takes longer and consumes more fuel, it is a good enough alternative to minimize the effects. Diversion of resources from other transport routes (for example, in the Pacific Ocean) did increase the prices on these routes, but they also helped to mitigate the damage from the blocking of the straits.

In contrast to the situation in the 1960s and 1970s, they write in the study that “the processes of globalization and the constant improvements in maritime transport in recent decades – including the reduction of the regulation of the maritime transport market, the expansion of the use of containers and the digitization of information about the transport make it easier for shipping companies to respond more flexibly to changes in the transport markets”. That is, it seems that the market mechanisms are proving themselves, and dramatically moderating the influence that the Houthis tried to create in order to pressure the world to stop Israel’s war in Gaza.

And Israel, which is actually the main target of the Houthis, was hardly harmed. The study presents it as “standing out as unusual: the value of Israeli imports from Asia-Oceania, which is usually transported via the Red Sea, decreased even before the Houthi attacks at a rate similar to the decrease in the value of imports from the rest of the world. The prices of imports to Israel also remained stable and do not seem to have been affected from the diversion of the shipping lanes”. The reasons for this, according to the study, are that to begin with, Israel’s trade routes with Asia are small compared to most Western countries, and the volume of imports as a whole decreased due to the effects of the war. In addition, “the shipping company Zim, whose home port is in the city of Haifa, preempted diverting its vessels to an alternative shipping route that bypasses Africa as early as November 2023, before the other shipping companies did so, in December 2023, which caused the decrease in imports to Israel to be gradual More compared to the decline recorded in other countries.”