Houthi Red Sea Control Threatens Egypt's Suez Canal Revenue

Yemen's Houthi militia has seized control of critical maritime passages in the Red Sea, including the volcanic island of Perim at the sea's entrance, along with stretches of Yemeni coastline and smaller islands. Their stated target is Saudi Arabia, which they have fought before and continue to oppose. But their expanding military footprint is creating a secondary crisis for Egypt, a country whose economic survival depends heavily on a single waterway.

When Houthi representatives announced their new position, they framed it with apparent restraint. Most vessels would be permitted passage through the Red Sea, they said—with a single, deliberate exception. Ships flying Saudi colors would not be allowed through. The message was calibrated: we are not shutting down the strait entirely. We are applying pressure where it counts.

Yet even selective disruption carries enormous weight. The Bab el-Mandeb Strait, the narrow passage between Yemen and the Horn of Africa through which all Red Sea traffic must flow, has already shown signs of strain. In mid-July, an average of 47 ships passed through daily. By late September, that number had fallen to 21 on some days, though weekend traffic occasionally rebounded to the 24-27 vessel range—roughly matching the ten-day average. The Houthis appear to be demonstrating capability without yet triggering total closure, a distinction that matters for their negotiating position and for the global shipping industry's calculations about risk.

For Egypt, the timing could hardly be worse. The Suez Canal, which Egypt operates and depends upon for roughly 10 percent of government revenue, had only recently begun recovering from earlier Houthi attacks. In 2024, those attacks cost Egypt approximately $6 billion in lost canal revenues—a staggering sum for a country that had previously earned between $9 billion and $10 billion annually from the passage. The Suez Canal Authority reported that during the 2025-2026 fiscal year, revenues had climbed back to $4.67 billion, a 23 percent increase from the previous year. That recovery was fragile, built on rising oil prices that made the longer route around Africa prohibitively expensive, pushing shipping companies back toward the Red Sea corridor.

Now that calculation is shifting again. A separate crisis compounds the pressure: Saudi Arabia's east-west pipeline to the port of Yanbu, which carries between 4 million and 5 million barrels of oil daily and was designed to bypass the Strait of Hormuz, has been damaged in recent drone attacks and will remain offline for weeks. That pipeline damage alone threatens to remove roughly 4 percent of global oil supply from circulation. When combined with potential Red Sea disruptions, the world faces a scenario where two critical chokepoints—the Persian Gulf and the Red Sea—could simultaneously become less reliable. Neither route can serve as a true backup for the other; global energy and trade flows depend on secure passage at multiple points simultaneously.

Egypt's options are severely constrained. The country maintains formal membership in the Saudi-led military coalition against the Houthis, but that participation is largely symbolic. Egypt's military capacity is limited, and the country has painful historical memory of deeper involvement in Yemen. In the 1960s, Egypt sent thousands of troops to support a government there, becoming entangled in a conflict that dragged on for years. Cairo has no appetite for repeating that experience, and observers note that Saudi Arabia and the United States have already tried and failed to contain the Houthis militarily.

On Tuesday, Saudi Crown Prince Mohammed bin Salman traveled to Cairo to press Egypt for stronger support against the Houthi threat. But Egypt faces a genuine dilemma: it is closely allied with Saudi Arabia while also being economically vulnerable to any further escalation between the Saudis and the Houthis. The most likely path forward, according to analysts, is diplomatic. Egypt will probably attempt to negotiate directly with the Houthis, trying to secure arrangements that protect Suez Canal traffic even as the broader regional conflict continues. Reports that the Houthis had offered to discuss shipping security with Egypt through the International Chamber of Shipping in London were later disputed by the chamber itself, which denied any such communication occurred. What remains clear is that Egypt is watching, waiting, and preparing to negotiate from a position of economic desperation rather than strength.