Current Scenario in the Red Sea & Persian Gulf Trade Routes

Red Sea: Security Crisis & Route Disruption

• Houthi Attacks Persist
  Yemen’s Houthi rebels continue to target merchant vessels, including coordinated drone, missile, and speedboat strikes. Notable incidents include the sinking of Eternity C, where drones and RPGs killed crew members, injured others, and resulted in kidnappings.

• Global Response & Naval Operations
  The UN extended monitoring of these attacks through early 2026. The EU’s Operation Aspides, a defensive maritime mission escorts ships but suffers from a severe shortage of warships, averaging fewer than one destroyer per day in the region.

• Shipping Reroutes & Economic Costs
  Over 90% of container traffic through the Red Sea has been diverted, forcing ships to navigate around the Cape of Good Hope adding roughly 10 extra days and $1 million in fuel per voyage. Egypt’s Suez Canal revenue plummeted by about $7 billion, representing nearly 5% of GDP.

• Environmental & Digital Fallout
  The attacks led to oil spills, ecological damage, and even severed undersea internet cables near Bab el-Mandeb temporarily disrupting 25% of global internet traffic.

Persian Gulf: Tensions and Trade Resilience

• Strait of Hormuz: A High-Stakes Chokepoint
  Roughly 20–30% of global oil exports transit this narrow passage. Threats from Iran and regional instability have elevated insurance and chartering costs dramatically.

• Rising Freight & Insurance Rates
  War-risk insurance premiums have more than doubled. Very Large Crude Carrier (VLCC) rates from the Gulf to China surged nearly 260%, hitting up to $100,000/day in extreme cases.

• Tech-Powered Port & Logistics Expansion
  Gulf states are investing heavily in modernizing infrastructure:

  • UAE's Jebel Ali is deploying AI, blockchain, and automated processes.

  • Saudi Arabia, under Vision 2030, is expanding ports like King Abdulaziz and King Abdullah.

  • Qatar’s Hamad Port has risen to prominence post-2017 blockade and remains a resilient hub.

Trade & Route Impacts

Region	Key Challenges & Developments
Red Sea	- Houthi attacks disrupting Red Sea corridor - Massive rerouting through Cape of Good Hope - Soaring transit times and costs - Environmental and digital infrastructure damage
Persian Gulf	- Strait of Hormuz remains a critical yet vulnerable route - Transport costs and insurance premiums spiking - Ports investing in digital resilience and capacity growth

Major shipping firms like Hapag-Lloyd report lower earnings forecasts due to uncertainty and rerouting costs. Meanwhile, companies such as Mitsui O.S.K. Lines continue operations through the Gulf, albeit at rising risk and cost.

Outlook & What Lies Ahead

• Stabilization Hopeful, But Fragile
  Some rebound is expected by late 2025 if security improves otherwise global freight could remain volatile.

• Strategic Diversification
  Gulf nations are building smart ports and alternative corridors to reduce reliance on single choke points.

• Persistent Risk Landscape
  Without resolution to regional conflicts like Yemen and Gaza, maritime insecurity will likely continue, emphasizing the importance of diplomatic efforts and naval cooperation.