A Double Blow to Global Trade… Crisis on This Maritime Route After Hormuz; Will Oil, Trade, and Supply Systems Come to a Halt?

New Delhi: The ongoing conflict in the Middle East has now entered a new and far more dangerous phase. The Houthis have now entered the fray in the ongoing conflict involving the U.S., Israel, and Iran—escalating the war further by firing missiles directly at Israel for the first time. This move has not only heightened regional tensions but has also posed new threats to the global economy.

The Houthi rebels had initially maintained a distance from this conflict for four weeks, but they have now openly taken up arms. This group—which controls Yemen’s capital, Sana’a, and large parts of the country—has previously carried out attacks against Israel during the Gaza war. However, while those attacks caused limited damage at the time, the circumstances are different this time around, and the stakes are significantly higher.

The real threat stems not merely from missile attacks on Israel, but from the Houthis’ control over key maritime routes. Yemen is situated along the coasts of the Red Sea and the Gulf of Aden, and its capital, Sana’a, remains under Houthi control. The Bab el-Mandeb Strait—a critical “chokepoint” connecting these two bodies of water—is of immense importance to the global economy. Approximately 12% of global trade passes through this strait. If the Houthis become actively involved in this conflict, impose restrictions on Bab el-Mandeb, and halt the movement of ships, the repercussions will be felt across the entire world.

The Significance of Hormuz and Bab el-Mandeb
The situation becomes even more critical given that a crisis is already unfolding in the Strait of Hormuz. This strait serves as the most vital conduit for the world’s energy supply, through which approximately 20% of global oil passes. If both Hormuz and Bab el-Mandeb are disrupted simultaneously, global supply chains will suffer a devastating double blow.

This will have a direct impact on oil prices. If oil supplies from the Gulf nations are interrupted, the cost of petrol and diesel will skyrocket across the globe. Furthermore, ships will be compelled to take the route around the Cape of Good Hope in Africa, a detour that will add approximately two weeks to their journey and significantly increase costs. These additional costs will ultimately be passed on to ordinary consumers, thereby fueling inflation.

What will be the impact on the global economy?
Experts believe that if this situation persists for an extended period, global GDP growth could decline by more than 1%. Sectors such as automobiles, electronics, and manufacturing—which rely heavily on “just-in-time” supply chains—are expected to be the most severely affected. The Houthis have previously targeted vessels in the Red Sea and have launched attacks on energy infrastructure in Saudi Arabia and the UAE. Consequently, there are apprehensions that they may once again initiate large-scale maritime blockades or attacks.

However, such actions could also elicit a forceful response. On previous occasions when the Houthis carried out similar attacks, the United States and Israel responded with airstrikes against their strongholds. Under these circumstances, the conflict could escalate even further. The most pressing concern is that if the Houthis commit their full military might to this conflict, it will cease to be merely a regional dispute and could instead spiral into a major global crisis. For the moment, the world’s attention remains fixed on the degree of aggression the Houthis choose to adopt going forward, as their next move will ultimately determine the extent and trajectory of this conflict.