Yemen's Iran-backed Houthi rebels captured Perim Island in September, a strategic point at the narrowest part of the Bab el-Mandeb Strait that links the Red Sea to the Gulf of Aden. The island's proximity to Horn of Africa ports, about 20 kilometres from Djibouti and a 20-minute flight from Ethiopia, underscores its significance. This development has raised concerns about the potential impact on regional trade and stability.
Since the start of the Gaza war in 2023, the Houthis have been firing on merchant vessels, and the recent capture of Perim raises the risk that the Bab el-Mandeb could become impassable. If ships avoid the strait, they must detour via the Suez Canal or around Africa's southern tip, adding significant distance and cost that will ultimately be passed to consumers. This shift in trade routes may have far-reaching consequences for the global economy.
The conflict compounds existing pressures from the Strait of Hormuz, which has already made fuel and fertiliser scarcer and pricier across the region. Djibouti, despite its modest population, remains a vital commercial and military hub at the Red Sea entrance, hosting ports that serve as transhipment points for global cargo. The country's strategic location makes it an essential player in regional trade.
UNDP's Djibouti representative warned that higher shipping costs could undermine the country's current economic upswing, as insurers now charge nearly double for war-risk coverage. Ethiopia, which routes about 95% of its trade through Djibouti's ports, faces steep price hikes for imports and exports as insurance premiums rise. This development may have significant implications for Ethiopia's economy and trade relationships.
The country also contends with a renewed internal conflict in Tigray, where rebel advances briefly threatened the main corridor linking Djibouti's ports to the Ethiopian hinterland. UNHCR reports that at least 3,700 Yemeni refugees have entered Djibouti since 10 September, mainly women, children and the elderly, with preparations underway to assist another 10,000 pending arrivals. The humanitarian situation in the region is becoming increasingly complex.
Regional observers note that the combined pressures of Houthi attacks, fuel shortages and unresolved Ethiopian conflicts could further destabilise safe passage through the Bab el-Mandeb and surrounding waters. The crisis has prompted an emergency UN Security Council meeting by African non-permanent members, urging free shipping lanes and a UN-led resolution to the Yemen conflict. The international community is closely monitoring the situation.
Shifts in trade routes are making ports in Kenya and Tanzania more attractive for transhipment as shippers seek alternatives to the Red Sea corridor. This development may have significant implications for the regional economy and trade relationships. The crisis in the Bab el-Mandeb Strait is having far-reaching consequences for global trade and stability.
Key points
- Escalating Houthi attacks on the Bab el-Mandeb Strait are raising shipping costs and pressuring economies from Djibouti to Ethiopia.
- The capture of Perim Island by Houthi rebels has raised concerns about the potential impact on regional trade and stability.
- The crisis has prompted an emergency UN Security Council meeting, urging free shipping lanes and a UN-led resolution to the Yemen conflict.
