Renewed Red Sea tensions put Egypt’s Suez Canal revenues back under pressure

Nearly three years after Houthi attacks in the Red Sea cost Egypt’s Suez Canal an estimated 11 billion dollars, renewed threats near the Bab el Mandeb Strait are once again testing the waterway’s stability and the foreign currency revenue Cairo depends on it to generate.

Yemen’s Houthi movement resumed targeting shipping in the Red Sea roughly two months ago, prompting fresh warnings from Egyptian officials about the potential fallout for global maritime trade routes, including the canal that links Asia and Europe. The renewed campaign coincides with territorial gains by the Houthis along Yemen’s western coastline, including their capture of strategic positions such as Mayyun Island inside the Bab el Mandeb Strait itself, the narrow passage connecting the Red Sea to the Gulf of Aden.

Tensions in the Red Sea and the Gulf of Aden have escalated sharply since July 20, when the Houthis declared what they called a maritime blockade against vessels linked to Saudi Arabia, framing the move as retaliation for what they describe as a Saudi blockade on Houthi controlled areas of Yemen. Since then, the group has targeted oil tankers and Saudi flagged vessels along regional shipping lanes and struck sites inside Saudi Arabia itself, including civilian airports and energy production facilities, causing both casualties and material damage. Saudi Arabia has led a coalition backing Yemen’s internationally recognized government since 2015, while Iran stands accused of arming and supporting the Houthis, who have controlled Sanaa and other major population centers since 2014.

Egypt and Saudi Arabia underscored the importance of protecting freedom of navigation through the Strait of Hormuz, Bab el Mandeb and the wider Red Sea last week, following talks in Cairo between Egyptian President Abdel Fattah el Sisi and Saudi Crown Prince Mohammed bin Salman. Days earlier, Sisi had raised the same concern at a BRICS summit in India, calling for safeguarding international waterways given how much of global trade depends on uninterrupted passage through the Red Sea and the canal.

Logistics expert Nasreddine Bougashish told a wire agency that Egypt’s anxiety over Bab el Mandeb stems directly from the passage’s role as what he called a strategic chokepoint tied closely to national security and economic stability. He said any disruption there would immediately push ships to divert away from the Suez Canal, striking directly at revenue that serves as one of Egypt’s primary sources of foreign currency. Bougashish warned that mounting pressure on the strait now threatens the broader efficiency of global supply chains, with consequences that extend well beyond Egypt to other regional economies.

Suez Canal Authority Chairman Osama Rabie sought to reassure the public during a World Maritime Day event on September 20, stating that the canal remains safe, that navigation continues on a regular schedule, and that its pilots are operating at peak readiness. He said 1,358 vessels transited the canal in August alone, generating 567.1 million dollars in revenue on a total net tonnage of 68.3 million tons. Rabie noted that earlier disruptions, referring to Houthi attacks on vessels linked to Israel following the Gaza war that began in October 2023, had pushed major shipping firms to reroute around Africa’s Cape of Good Hope, costing the canal roughly 11 billion dollars in lost revenue at the time. He argued that episode ultimately reinforced the canal’s importance to global trade and proved no sustainable alternative route exists, adding that the authority diversified its income during that crisis by localizing vessel production and forming new private sector partnerships.

Those reassurances arrived as Danish shipping giant Maersk and Germany’s Hapag Lloyd announced separately on September 14 that four joint container services would resume passage through the Suez Canal rather than continuing around the Cape of Good Hope, a signal some analysts read as a vote of confidence in the canal’s stability.

Khaled al Shafei, head of the Capital Centre for Economic Studies, said the canal weathered the 2023 crisis because of its inherent geographic and economic flexibility, which limited the damage to temporary financial losses until security conditions stabilized. He said the canal offered fee discounts and diversified its maritime services at the time as part of its crisis response, and he expects the waterway to withstand renewed pressure again given that it typically handles around 12 percent of global trade and roughly 30 percent of global container traffic. He also did not rule out Egyptian mediation to help end the current maritime tensions and prevent further economic damage to Egypt, Saudi Arabia and other Red Sea states.

Maritime economist Ahmed al Shami offered a more cautious assessment, noting that the direct impact on Suez Canal traffic has so far remained limited even as broader risks around Bab el Mandeb persist. He said the current situation differs meaningfully from earlier tensions because the Houthis have specifically targeted Saudi vessels this time, a shift that leaves the ultimate scope of impact dependent on how the conflict develops. Al Shami warned that continued attacks on shipping would eventually force companies to alter their routes regardless, and that a full scale expansion of Houthi attacks on vessels could disrupt as much as 25 to 30 percent of global trade, not just canal traffic specifically. Even so, he pointed to Maersk’s decision to return to the canal as evidence that shipping companies still judge the route more economically viable than the longer path around Africa, and he projected canal revenues could climb above 7.5 billion dollars by the middle of next year, compared with less than 4 billion dollars in 2024.

The competing assessments underscore how closely tied Egypt’s economic fortunes remain to a conflict playing out largely beyond its borders, leaving the canal’s near term outlook dependent less on Cairo’s own policy choices than on how far the confrontation between Saudi Arabia, the Houthis and their regional backers ultimately spreads.