Israel-Hamas War Hits World Economy

( – The whole world is being shaken economically by the conflicts in the Middle East as the situation in Yemen, involving the rebels, has escalated from a local conflict to a major concern for global commerce, regional security, and international energy markets.

Initially a relatively unknown group in one of the world’s poorest countries, the Houthis rebels, with financial and logistical support from Iran, have become a significant force in the Middle East conflict.

Their rise to prominence began with an assault by Hamas on Israel on October 7, which quickly expanded across the region. The Houthis have been using cost-effective means such as drones and anti-ship missiles to disrupt commercial shipping in the Red Sea, directly challenging U.S. forces and international maritime security.

The U.S. military is actively engaged in countering the Houthis, having recently intercepted a barrage of drones and missiles from the group. This confrontation is part of a broader conflict that also involves other Iranian proxies in Iraq and Syria.

The Houthis’ tactics have significant implications for global trade and energy markets. Their attacks on shipping routes in the Red Sea have led to increased concerns among commercial shipping companies and the energy sector. These disruptions threaten the stability of oil transportation and the safety of maritime routes.

In response, the U.S. and its allies have initiated a maritime security task force, Operation Prosperity Guardian, to mitigate the Houthi attacks. However, the effectiveness of this initiative is still under scrutiny.

The Biden administration faces a complex challenge in dealing with the Houthis. Unlike other Iran-backed groups like Hezbollah or Kataib Hezbollah, the Houthis are less susceptible to direct military retaliation. This is partly due to the potential for escalating the conflict in the Middle East and disrupting ongoing peace talks to resolve Yemen’s civil war. Additionally, the U.S. may have limited intelligence capabilities in Yemen, making it challenging to identify and target Houthi operations accurately.

Despite these challenges, some analysts argue for a stronger stance against the Houthis and other Iran-backed groups to prevent further regional instability and violence. The Houthis’ ability to disrupt critical shipping routes and their resistance to direct military action presents a unique and ongoing threat to regional and global stability.

The situation is also impacting global logistics, with significant numbers of container vessels being diverted from the Red Sea due to security concerns. While energy markets have so far absorbed this uncertainty, there are long-term implications for global trade and shipping routes. The decision by Maersk and other leading shipping firms to resume sailing through the Red Sea, influenced by the establishment of Operation Prosperity Guardian, indicates some confidence in the efforts to secure these vital maritime pathways. However, the effectiveness and long-term impact of these security measures remain to be seen.