Saudi Arabia seeks Red Sea coalition as Houthis target 15% of global trade

Saudi Arabia launched an initiative to form a coalition aimed at securing maritime shipping safety in the Red Sea, according to Reuters, after Yemen's Houthi group said it was considering imposing fees on commercial vessels transiting the Bab el-Mandeb strait.

"The threat to impose fees on Red Sea shipping represents a direct challenge to the global trade order," said a regional security official familiar with the discussions. "Saudi Arabia cannot allow a non-state actor to control access to a waterway that handles 15 percent of global seaborne trade."

The Houthis on July 20 declared a maritime embargo against Saudi Arabia, expanding attacks on tankers carrying energy supplies beyond the Gulf. At least one Saudi tanker was attacked off the southern port of Jizan near Yemen. The Iran-aligned group is now exploring a system of fees on most traffic through the Bab el-Mandeb gateway, which links the southern Red Sea with the Gulf of Aden, according to regional sources. Houthi officials who traveled to Iran in July for the funeral of late Supreme Leader Ayatollah Ali Khamenei discussed the fee plan with Iranian counterparts, who offered guidance on setting up a regulatory authority, an Arab official said. Chinese vessels would be exempt from the proposed charges, the sources added.

The Bab el-Mandeb strait is a critical chokepoint for global energy and commodity trade. Sailing through the waterway to Asia takes about 16 days, compared with 50 days for cargoes rerouted through the northern Red Sea, the Suez Canal and then via southern Africa. The Houthis were previously alleged to have collected fees from some shipping agencies during their maritime campaign in 2024, with a UN Panel of Experts report estimating those fees at $180 million a month, though the figure was not independently verified.

Red Sea trade at risk

The Saudi coalition initiative comes as Red Sea traffic has not fully recovered since Houthi attacks on merchant vessels began in November 2023, which the group said was an act of solidarity with Palestinians in the Gaza war. Major shipping companies rerouted around southern Africa during that period, driving up shipping and insurance costs and stoking fears of a renewed cost-of-living crisis. The attacks only ended with the Gaza ceasefire last October.

The broader regional context has also deteriorated. Iran has ruled out Oman's proposal for joint management of the Strait of Hormuz that would include voluntary fees from ships, a senior Iranian official told Reuters on Wednesday, scuppering hopes for a resolution to the impasse that has choked off Gulf trade for months. Iranian missile salvoes and US-Saudi strikes on Iran-backed groups in Iraq have shattered a brief lull in Middle East hostilities, raising the risk of a wider conflict that could further disrupt energy routes.

For Saudi Arabia, the stakes are particularly high. Closure of the Bab el-Mandeb would deprive the kingdom of a critical alternative to the Strait of Hormuz and heighten fears of oil supply shortages. The last time a similar threat to Red Sea shipping emerged in late 2023, Brent crude prices rose more than 8 percent over two months while shipping costs for container routes through the Suez Canal surged more than 200 percent, according to data from Freightos and the Baltic Exchange. Insurance premiums for vessels transiting the Red Sea also jumped, with war risk premiums rising to as much as 1 percent of a vessel's hull value from near zero before the attacks.

What comes next

The success of Saudi Arabia's coalition-building effort will depend on whether it can attract broad international participation, particularly from the United States and European nations whose commercial fleets have been directly affected. The US and UK carried out coordinated air strikes on Houthi targets in Yemen in January 2024 in response to the earlier wave of attacks, but the Houthis vowed to persist in their military operations until a ceasefire was agreed in Gaza. With the Gaza ceasefire now in place since October, the Houthis' continued threats against Saudi shipping suggest the group is pursuing an independent agenda beyond the Palestinian cause, one centered on establishing control over one of the world's most vital maritime chokepoints.

This article is for informational purposes only and does not constitute investment advice.