In a second breath: The Middle East is threatening global trade again

The situation in the Middle East has escalated dramatically again. Following Iran, the Yemeni Houthis joined the attacks on Israel. Now the Bab-el-Mandeb Strait, a strategic sea route through which about 15% of global trade passes, is under threat of blocking. Israel responds to the attacks and simultaneously strikes Lebanon. Experts warn that the Houthis are capable of disrupting navigation in the Red Sea, which could lead to a new disruption in global logistics. Details can be found in the Izvestia article.

We exchanged answers

On the morning of June 8, air defense was operating in the Iranian capital: according to the Mehr publication, a drone was shot down, and explosions were heard in the south of Tehran. Later, there were explanations from the IDF: "The Israeli Air Force attacked several targets at the petrochemical complex in Mahshahr."

The Islamic Revolutionary Guard Corps (IRGC), in turn, said that the Israeli military used "air-launched ballistic missiles." This type of missile is launched from an airplane. In response, the Iranian side attacked a similar facility in Haifa.

The current exchange of blows has become one of the most powerful since the temporary truce was signed in April. Formally, the escalation began in Lebanon: Israel announced a Hezbollah strike in the north of the country and in response attacked the southern suburbs of Beirut. Iran then launched a missile attack on Israel, and Israel responded with attacks on Iran.

Now the Yemeni Houthis have joined the conflict.: They fired a rocket towards Tel Aviv. The Israeli military said it had intercepted the projectile. However, the Houthis did not stop there: the group again announced that Israeli ships in the Red Sea would be their "target."

"We are announcing a complete ban <...> on Israeli shipping in the Red Sea, and any movement <...> will be considered by our forces as military targets," the Houthi military command said in a statement.

This threat will not come as a surprise to the Jewish state: due to the attacks of the Shiite group, the routes of Israelis through the Red Sea are already being rebuilt. Some of the ships are bypassing Africa via the Cape of Good Hope, which increases the delivery time by about 10-14 days.

But the risks are not limited to this. The Bab-el-Mandeb Strait, an important logistics route through which about 15% of global trade passes, is again under threat. The Houthis had threatened to block it before, but now Iran has announced the possibility of blocking the route in case of further escalation by Israel.

"The choice is yours: stop reckless actions or enter the new reality of the regulated balance of the two straits," said Ali Akbar Velayati, senior adviser to the Supreme Leader of Iran.

Moreover, there are opportunities for this. For a partial blockade, it is not necessary to constantly monitor the entire strait. It is enough to create a threat to shipping: Carriers will start reviewing routes and insurance, and delivery times will increase, which will affect global trade.

The allies are splitting up

The current escalation is taking place against the backdrop of public disagreements between the United States and Israel. Even on the eve of the strikes, the media reported that US President Donald Trump had asked Israeli Prime Minister Benjamin Netanyahu to refuse to respond to Iran, and he allegedly agreed.

"We're at a point where why jeopardize a potential deal when it's already the fourth quarter of the game. The president believes that we have been doing this for three months, now is the time to bring the matter to an end," an American official told reporters on condition of anonymity.

And this is not the first such episode. More recently, according to media reports, Trump was "furious" when he learned of Netanyahu's plans to attack Beirut. "What the fuck are you doing?" the American president shouted at the Israeli prime minister over the phone.

This reaction is understandable: congressional elections will be held in the United States in November, and the protracted conflict is hitting the positions of the Republican Party. According to Moody's Analytics, since the beginning of the war with Iran, the average American family has already spent about $750 more than usual.

This not only gives Democrats a reason to criticize the White House for dragging the country into the Iranian adventure, but also causes irritation within the Republican Party. In particular, on June 4, the US House of Representatives for the first time approved a resolution prohibiting Trump from continuing the war with Iran without congressional approval. Along with the Democrats, several Republicans voted for the initiative.

The motives of the Israeli side are also clear: elections to the Knesset (parliament) are also expected there in the fall. And Netanyahu's position is precarious. According to an Agam Labs survey, Likud support in northern Israel has dropped to 23% from 35% in the 2022 elections. In these circumstances, it is important for the authorities to demonstrate to voters the effectiveness of military campaigns.

However, the negotiating track between the United States and Iran may now be in doubt. Tehran has already hinted that it does not consider Israel to be a completely independent player. "No one believes that the Israeli regime will take any action without the approval of the United States," said Iranian Foreign Ministry spokesman Esmail Bagai. Nevertheless, according to him, the contacts of the Islamic Republic with the White House are still ongoing.

What the experts say

There is a feeling that the war in the Middle East has received a second wind, Andrei Yashlavsky, a leading researcher at the Primakov National Research Institute of World Economy and International Relations of the Russian Academy of Sciences, tells Izvestia. According to him, this is becoming especially noticeable against the background of the intensification of the Yemeni Houthis.

— It is not a fact that this will be followed by a cloud of rockets from Yemen towards Israel. It is not a fact that the Houthis will block maritime traffic through the Bab-el-Mandeb Strait. But this threat itself serves as an additional factor of pressure on the participants in the diplomatic negotiations. And based on today, the Middle East crisis seems far from over," the expert believes.

According to Kamran Hasanov, an expert at the Financial University under the Government of the Russian Federation, the situation may come to a head closer to autumn, before the midterm elections to the US Congress. Trump will have to choose between continuing the conflict and a diplomatic deal.

— If we are talking about a military scenario, a decision should be made not in the last days of October, but earlier, since the development of the operation will take time. If the focus is on diplomacy, the White House may try to present the agreement with Iran as Trump's foreign policy trump card before the election, the source explains.

According to him, there is still a chance for an agreement, but so far the situation remains in limbo: there is no full-fledged escalation, however, there is no breakthrough in the negotiations either. Iran is trying to set the limits of what is acceptable to Israel and show that its conditions must be taken into account.

A separate risk is the Bab-el-Mandeb Strait. The economic consequences of such a threat can be serious, says Andrey Smirnov, an expert on the stock market at BCS World of Investments. First of all, we should expect an increase in insurance premiums for the transportation of goods across the strait. If they rise even to 0.5–1% of the cost of cargo, the flight of a large container ship or tanker will become more expensive by hundreds of thousands of dollars.

— The consequences will vary from country to country, but in most cases the effect will be negative. Exporters risk losing part of their budget revenues and foreign exchange earnings. Importers will have to fight for a limited amount of necessary goods, which will provoke higher prices and increased budget expenditures," the expert tells Izvestia.

Together, according to the analyst, this could lead to a slowdown in global economic growth, accelerated inflation and an increase in the debt burden.

At the same time, experts interviewed by Izvestia doubt that Iran will resort to such a lever of pressure right now. A complete closure of the Bab el-Mandeb Strait would affect not only Israel, but also global trade in general. Therefore, it is more profitable for Tehran to keep the threat of a blockade as an argument in negotiations, but not to bring the situation to a full-fledged closure of the route.