Throughout the war between Israel and Hamas, Yemen’s Houthi rebels have taken to supporting Hamas by targeting ships in the Red Sea and Bab-el-Mandeb. The Iran-backed force has all but crippled passage through the Suez Canal, targeting Israeli-affiliated vessels, as well as those linked to Israel’s allies, stating that its efforts are in direct support of Hamas and Gaza. 

During this time, they have mainly limited their attacks to ships but on 19 July they escalated their aggression by firing a drone against Tel Aviv, near the US Embassy, which killed one Israeli civilian and injured four. This marked the first direct Houthi attack into central Israel and the first fatal one. In response, Israel bombed a Houthi-controlled port of Hodeida, killing six. Israel chose the port because it is used as an entry point for Iranian arms.

This marks a new phase in the war. The Houthis have been involved in the fighting since the beginning but the attack on Tel Aviv, and their proclamation that such attacks would continue, opens a new front in addition to that being waged in Gaza and with Hezbollah in the North. It also highlights the heavy involvement of Iran with yet another proxy launching direct attacks into Israeli territory. The implications of this latest escalation are as follows.

The multi-front war is heating up

The war against Hamas in Gaza shows no signs of abating and other fronts are heating up. Both Hezbollah in the North and the Houthis in Yemen have explicitly said that their efforts are in direct response to Israeli actions in Gaza, and will not cease until there is an end to the fighting in Gaza. Israel is therefore knee-deep in a multi-front war even though the fighting in the North and against the Houthis is currently still relatively low scaley. Any calculations of continued fighting in Gaza have to be weighed against the inevitability that it will lead to continued attacks in the North and by the Houthis. This is the closest we have been to a wide regional war and some claim that this reality is already upon us. Notably, this is not something that can be walked back. Hezbollah and the Houthis have been explicit about tying the war in Gaza to their aggression, essentially requiring Israel to contend with all three when making decisions about its continued operation in Gaza.

The economic implications are severe

The Houthis have shown their ability to cripple one of the world’s most important trade routes, with tangible economic consequences across the globe. Their ability to decide who passes safely through the Suez Canal and who is subject to possible attacks has had an impact on the great power competition and geopolitics. The US and its allies have been hit most severely. By contrast China and its proxies have not felt the impact as heavily because the Houthis have refrained from attacking China-flagged vessels. The ability to remain somewhat immune to trade disruptions is a major geopolitical advantage, and China has emerged as a victor against the US. For Israel specifically, the Houthis are showing their ability to stop any sea trade through Eilat port. Serious shipping delays and increased shipping and insurance costs for Israeli manufacturers and importers are being passed on to consumers, so Israelis are also feeling the economic impact and consequently the country’s economy is slowing down.

Shay Zavaro
Managing Director
Monfort Advisory