Economic Turmoil in Egypt Mounts as Houthi Attacks on Shipping Vessels Force Costly Reroutes

Houthi militants overtook the Galaxy Leader commercial ship in the Red Sea on November 19. The Bahamas, where the ship is flagged, has emphasized the difficulty of negotiating with the Houthis as non-state actors. (CBC)

The Houthis, Iran-backed Yemen-based militants, have been attacking commercial shipping vessels since November 19, 2023, specifically targeting ships supplying or linked to Israel. Despite the United States and the United Kingdom leading months-long airstrike campaigns in Yemen, Houthi attacks have continued incessantly.

The effects of these attacks on the global economy have become increasingly clear as fear of being targeted has led five of the largest shipping firms to reroute their ships away from the Bab el Mandeb Strait, the waterway leading directly to the Suez Canal. Diversion of ships has been incredibly costly for one state in particular: Egypt. 

Control of Suez Canal trade amounts to about two percent of Egypt’s GDP, and the country faced a 40 percent drop in fee revenue this January compared to last year. This loss has further contributed to Egypt’s economic woes, which include an immense foreign debt and foreign currency shortage, suffering tourism and gas sectors, and soaring prices that have aroused significant public discontent. 

In an attempt to mitigate the drastic loss in shipping revenue, Egypt increased its transit fees by ten to 15 percent in January. However, this measure does not adequately address the root causes of the issue. Although Egypt has expressed clear concern over the regional implications of the Israel-Hamas war, they have not taken action to deter the Houthis’ militant acts. Amid increasing public discontent, the state’s inaction is likely due to a fear of the Egyptian public, which largely supports Palestinians, perceiving the government as siding with Israel.