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Houthi Attack Israel – What are the Geopolitical Consequences?

Monfort Advisory brief / July 2024

Throughout the war between Israel and Hamas, the Houthi Rebels in Yemen 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 vessels by countries linked to Israel, stating that its efforts are in direct support of Hamas and Gaza. During this time, the Houthis have mainly limited their attacks to ships, but this week (July 19), the Houthis escalated their aggression by firing a drone to Tel Aviv, near the US Embassy, which killed one Israeli civilian and injured four. This marks the first Houthi attack directly into the center of Israel and the first fatal one. In response, Israel bombed a Houtih-controlled port in Yemen, killing six. Israel chose the port due to its utility as an entryway for Iranian arms.
This marks a new phase in the war. While the Houthis have been involved in the fighting since the beginning, their attack on Tel Aviv, and their proclamation that such attacks would continue, opens a new front – in addition to the one being waged in Gaza and with Hezbollah in the North. This 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.

1) Multi-front war is heating up
As noted, as the war against Hamas in Gaza does not show signs of abating, other fronts are heating up. Both Hezbollah in the North and the Houthis in Yemen have said explicitly that their efforts are in direct response to Israeli actions in Gaza, adding that they would not cease until there is an end to the fighting in Gaza. This means that Israel is knee-deep in a multi-front war, even with the fighting in the North and against the Houthis being at a relatively low scale currently. 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’ve 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.

2) The economic implications are severe
The Houthis have shown their ability to cripple one of the most important trade routes in the world, 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, while China and its proxies have not felt the impact as heavily – as 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 the Eilat port. Serious shipping delays and increased shipping and insurance costs for Israeli manufacturers and importers are being passed down to consumers, so Israelis too are feeling the economic impact and the Israeli economy is slowing down as a result.