Houthi Inc: the pirates who weaponised globalisation

Summary
- Their Red Sea protection racket is a disturbing glimpse into an anarchic world
You might think a ceasefire in Gaza would herald a period of calm in the Middle East. But as we report this week, one militant group has created a violent and lucrative new business franchise that is built to last. The Houthis are holding Red Sea shipping to ransom, notionally in solidarity with the Palestinians, but in reality to extract income from the industry and exert influence over the region. They have had a banner year.
The Economist estimates that Red Sea cargo shipments are 70% lower by volume and that, by shaking down ship owners, they are earning hundreds of millions of dollars a year—or even billions—while imposing hundreds of billions of dollars of cost on the world. Far from going quiet when the shooting stops in Gaza, the Houthis may be heralding an anarchic world without rules or a policeman.
The Houthis, a political and religious group that originated in north-west Yemen, are part of Iran’s “axis of resistance", a network of proxies across the Middle East. Whereas Hamas and Hizbullah have been smashed by Israel and Bashar al-Assad’s regime in Syria has collapsed, the Houthis have staying power. That is owing to the fact that are in a remote, rugged country that is violent, divided and poor. Repeated American, allied and Israeli air and naval strikes have had only limited effect at vast expense. An earlier attempt to quell the Houthis by force, led by Saudi Arabia in 2015-22, failed amid terrible civilian casualties.
For all their country’s failings, the Houthis have a clever business model. Because of the proliferation of cheap missiles and drones to non-state groups that can strike frequently and at long range, they pose a credible and sustained threat to commercial shipping passing through the Red Sea via the Suez Canal, which normally handles 12% of global trade. But they offer a choice. If you cut a deal using their helpful customer-relations email address and black-market payment systems, they will grant you safe passage. By one estimate, illegal payments to the Houthis could amount to $2bn a year.
Because their target is Western firms, which often want to avoid paying protection money, the pattern of activity in the Red Sea has shifted. China’s share of traffic in the strait has increased by a quarter since October 2023. The big Western shipping lines are taking the longer route, around Africa. The extra time and fuel this requires increases costs and eats up shipping capacity. The Economist estimates that the bill, some of which is passed on to consumers, amounts to $175bn a year.
What to do? Although the Houthis may pause following the Gaza ceasefire, their ability to threaten ships will remain. Any “maximum pressure" campaign against Iran by Donald Trump could affect the Houthis, who rely on Iranian missiles and Iranian and Russian targeting information. Still, America is not a big user of the Suez Canal, so Mr Trump’s appetite for pursuing the Houthis directly may be limited. Besides, no one has yet identified an effective aerial and naval strategy against them and a ground invasion of Yemen is out of the question.
Yet even if Iran were to disown them, the Houthis would have good cause to continue the extortion and the money to buy the weapons they need. They could also threaten other targets, including the oil-rich Gulf states. Hence, if Mr Trump turns a blind eye to the Houthis, other countries in Asia, the Middle East and Europe may eventually follow China and pay the Houthis protection money despite also paying lip service to the principle of freedom of navigation.
That would hardly break the world economy, but it would reshape it. A permanent tail-risk would become embedded in financial and shipping markets as investors factored in the possibility of a total closure of the Suez Canal or Houthi strikes on other targets in the region. There would be an enduring loss of efficiency. And market shares in shipping would shift as Western firms lost business to vessels carrying the flag of China or other rule-breakers.
Businessmen or believers?
Similar trends are discernible as other industries, including air travel, are reshaped by swirling geopolitical risks. The Houthis have discovered that the world is unwilling to work together, although the costs of inaction are high. Indeed, they have been so successful at exploiting collective inertia that other militias may pay them the compliment of imitating them.
© 2025, The Economist Newspaper Ltd. All rights reserved. From The Economist, published under licence. The original content can be found on www.economist.com