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KEY QUESTIONS

• WHAT HAPPENED? Ethiopia and Eritrea are locked in an escalating standoff over Red Sea access, with military buildups and hostile rhetoric mounting on both sides of the border

• WHY IT MATTERS? The Red Sea is already buckling under Iran-driven energy pressure, a second simultaneous flashpoint in the same corridor would be a geoeconomic crisis, not just a regional one

• WHAT’S NEXT? No open war has begun, but the conditions for one are firmly in place

While eyes and headlines remain firmly locked on the Strait of Hormuz, tensions are boiling westward in the Red Sea. A vital maritime inlet sitting between the Gulf and East Africa, roughly 12% of global trade passes through the Red Sea. Critically, the Red Sea and Hormuz together form the passageway connecting Gulf energy to global oil markets.

Ever since the US and Israeli strikes on Iran on February 28, fears have arisen that the Houthis, a Yemeni militia backed by Tehran, will resume striking shipping traversing the Red Sea and the Bab el-Mandeb Strait, as the group did from late 2023 to mid-2025. Shipping giants such as Maersk are already avoiding the inlet in anticipation.

Yet if a new Red Sea crisis occurs, it won’t just be restricted to Yemen. On the western flank of the Red Sea, a separate flashpoint is emerging between longtime rivals Ethiopia and Eritrea, and the stakes are just as high.

The Specter of 1998

As the capital of the world’s most populous landlocked country, Ethiopia has long aspired to maritime access. That strategic imperative contributed to its annexation of Eritrea in 1962, and since Eritrea’s secession in 1993, Ethiopia has depended on Djibouti for 95% of its seaborne trade, at an annual cost of $1.5 billion.

For Prime Minister Abiy Ahmed, being landlocked is being deadlocked, and he intends to change that. In a televised statement, Ahmed declared:

“The Red Sea was in our hands 30 years ago. That history was yesterday’s mistake. Tomorrow it will be corrected. It is not too difficult.”

Ahmed is far from alone. Ethiopian Ambassador to Kenya and retired General Bacha Debele said in a November interview: “The question now is not whether Assab is ours or not, but how we get it back.” Assab is a southern Eritrean Red Sea port roughly 70km from the Ethiopian border, long seen in Addis Ababa as the most direct path to the sea.

What began as a war of words has since escalated. In December, Eritrea withdrew from IGAD, East Africa’s regional bloc, accusing it of failing to counter Ethiopian aggression. Eritrea has since been accused of tactically supporting the Tigrayan People’s Liberation Front (TPLF), an armed militia and separatist movement in Ethiopia. Ethiopia has responded with a reported military buildup along the Eritrean border.

To many observers, the specter of the 1998 border war has returned.

A Corridor Already on Life Support

The Houthi campaign on Red Sea shipping was far from a series of isolated attacks; it triggered a full-blown trade crisis. Container traffic fell roughly 90% at its peak, freight rates rose close to 80%, and Suez transits roughly halved. Shipping companies rerouting via the Cape of Good Hope added an average of two weeks per voyage.

With energy trade already under pressure from the Hormuz closure–which new Iranian Supreme Leader Mojtaba Khamenei has signaled he intends to maintain–the risk of a compounding crunch is real. The Ethiopia-Eritrea crisis deepens that calculus further. The Bab el-Mandeb carries roughly 8.6 million barrels of oil per day and Eritrea sits directly above it. Assab, the port at the centre of the Ethiopia-Eritrea confrontation, is situated near the strait and could easily be drawn into any military exchange between Addis Ababa and Asmara.

Markets and insurers can barely absorb one shock. Two simultaneous shocks to the same corridor is an entirely different risk category.

The Coming Red Sea Crunch

No open war has begun, and the involved parties remain publicly committed to diplomacy. But the conditions for conflict–military posturing, proxy accusations, and hardening rhetoric on both sides–are firmly in place.

The world learned in 2023 that Red Sea disruption moves energy prices, inflates shipping costs, and reshapes global supply chains almost overnight. That came from Yemen alone. A second front in the same corridor, layered onto an Iran-driven energy crisis, would not be a regional story; it would be a geoeconomic calamity.

And as diplomatic institutions strain under the weight of global instability, the question is whether diplomacy can hold when both sides view the stakes as existential.

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KEY FACTS

• WHAT HAPPENED? Leading shipping giant Maersk is abandoning the Red Sea amid the Gulf crisis, rerouting around South Africa’s Cape of Good Hope

• WHY IT MATTERS? South African port activity is surging, but the country is caught in a bind: record revenues and new investment on one side, an oil price spike and a sliding currency on the other

• WHAT’S NEXT? Because of investor uncertainty, Gulf capital turning inward, and a widening diplomatic rift with Europe, Pretoria’s maritime windfall may be short-lived

What Happened

Danish shipping giant Maersk announced last week it would reroute its vessels away from the Arabian Gulf. The move comes as both the Strait of Hormuz and the Red Sea—two maritime chokepoints critical to global energy trade—face mounting pressure from the escalating Middle East crisis.

Following American and Israeli strikes on Iran on February 28, Tehran moved swiftly to impose a blockade on the Strait of Hormuz, through which roughly 20% of the world’s oil flows. Simultaneously, the Yemeni Houthis, an Iran-aligned militia, have threatened to resume attacks on Red Sea shipping. The Houthis waged a similar campaign from late 2023 through 2025; at its peak, they drove a 30% surge in container freight rates and added an average of two weeks to shipping times.

With the Red Sea off the table, Maersk is heading southward, routing off the Cape of Good Hope and going through ports including Durban, Cape Town, and Ngqura in South Africa. The detour extends average transit times from 25 to 34 days, according to Maritime Analytica.

For South Africa, it’s a geopolitical win—but one masking deep economic vulnerabilities.

Why It Matters

The numbers are striking. Between December 2023 and March 2024, arrivals at South African ports surged 328%, according to UN Trade and Development. Seaborne traffic around the Cape rose 53% from October 2023 to February 2024. Transnet Port Terminals, a South African logistical management organization, reported revenue growth of 11.6%, reaching R76.7 billion ($4.26 billion) for the financial year ending March 2024.

Increased traffic is drawing new investment. Astron Energy recently deployed its Pearl Kate bunkering tanker to supply low-sulphur marine fuel along the coast. In August 2024, Transnet secured a R5 billion ($283 million) loan from the BRICS-backed New Development Bank to modernize freight rail infrastructure.

Strategically, becoming a key transit point for global energy flows hands Pretoria newfound diplomatic leverage, particularly over Europe, which has grown increasingly dependent on Gulf energy since Russia’s 2022 invasion of Ukraine.

But there’s a cost. Higher transit times are pushing Brent crude oil demand up, and with it, prices: going from roughly $72.48 per barrel on February 28 to over $90 as of most recently. And as global market volatility sends investors fleeing to the US dollar, the South African Rand is feeling the pressure, sliding to 16.85 against the dollar on Monday, a 3-month low, according to Reuters.

What’s Next

Maritime analytics firm Xeneta predicts that more shippers will follow Maersk’s lead and that none will return to the Red Sea for the remainder of the year.

The surge in traffic demands urgent port infrastructure investment, but investor uncertainty clouds the outlook. A $3 billion LNG plant announced for Durban, backed by Swiss commodity trader Vitol, now hangs in the balance as geopolitical tensions spark unease.

The Gulf states are among South Africa’s most active port investors, with the UAE alone committing over $1.3 billion in 2024. Yet the ongoing regional crisis is likely to direct their capital inward. A report from EnterpriseAM predicts “moderate” capital outflows from the UAE for the foreseeable future.

Diplomacy adds another layer of risk. South Africa’s deepening ties with BRICS nations, its ICJ case against Israel, and its public criticism of the joint American-Israeli operation have strained relations with Europe, its primary customer for Cape-routed energy. A diplomatic spat could quickly bleed into trade friction, undermining the very opportunity the crisis has created.

South Africa finds itself at a crossroads: positioned to capitalize on a historic maritime rerouting, but hemmed in by economic fragility and a foreign policy posture that may cost it its most valuable customers.

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KEY FACTS

• WHAT HAPPENED? Coordinated US-Israeli strikes on Iran have pushed pushed Brent crude up 13%, as Tehran and its allies threaten pressure on the Strait of Hormuz and Red Sea

• WHY IT MATTERS? Europe has become deeply reliant on Gulf oil and any disruptions in the Red Sea will only further strangle the continent’s energy supply chains

• WHAT’S NEXT? European nations may deploy naval forces to protect the Red Sea while deepening economic engagement with South Africa

What Happened

Europe’s ongoing energy crisis is set to face deeper turbulence. With the continent’s energy balances down roughly 9% since 2021, the EU has relied increasingly on Gulf oil to meet its energy needs, yet that reliance has become a hindrance amid the ongoing Middle East crisis. This weekend, coordinated strikes by the United States and Israel killed Iran’s top leadership, prompting Tehran to retaliate across the Gulf.

The region finds itself teetering toward chaos, with oil markets following suit. The significant variable in this calculus is the Strait of Hormuz, a critical chokepoint through which a fifth of the world’s oil is transported. The Strait is currently facing pressure as Iran threatens to close it; that threat alone has sent Brent crude oil prices flying by 13% to $22 a barrel, while shipping giants such as Danish Maersk have suspended vessel crossings in the Strait.

Yet, as Middle East analyst of The Levant Lens, Bassel Doueik, notes, the Hormuz is only one part of the wider passageway through which Gulf oil is transported to Europe.

“We often think the Strait of Hormuz is the only corridor to watch for oil trade routes to Europe, but the Red Sea has been under sustained pressure from Houthi militias in Yemen since 2023,” Doueik said. “If attacks resume, it could strangle the trade route to the European Union and spike oil prices further.”

Why It Matters

The last Houthi campaign in the Red Sea—which the group announced it intends to resume—sparked a 30% rise in container freight rates and an average two-week increase in shipping time. Already, Maersk announced it would also pause traversals in the Red Sea, and other shippers are likely to follow suit.

The result will only strangle Europe’s energy supply even more. QatarEnergy, one of the globe’s most prominent energy suppliers, has paused LNG production operations amid the conflict, increasing natural gas prices across Europe and Asia by 30%. The pause of operations by shippers such as Maersk will only spike prices further as supply limits.

“With Maersk suspending operations, this is a big hit for the entire world,” Doueik said. “Shipping costs rise, oil prices rise, and living costs in Europe increase.”

The move is particularly concerning as the continent enters the spring and summer months, increasing consumer demand for air conditioning.

What’s Next

The coming weeks will be decisive. During the Houthis’ last campaign, various European countries took part in Operation Prosperity Guardian, a multinational coalition to counter the Houthis attacks. Doueik suggests we could see something similar unfold.

“If supply shortages are detected, European countries may even deploy naval units to ensure ships can transit safely,” Doueik said. “A French aircraft carrier has already been deployed to the Middle East, signaling anticipation of increased attacks.”

While shippers such as Maersk have announced their intention to revert their Red Sea shipments southward along the Cape of Good Hope, even this isn’t enough to address concerns. Not only will it likely add over ten days of traversal to European markets, but South Africa’s increasing alignment with BRICS has become a geopolitical flashpoint between Pretoria and the West. South Africa’s recent condemnation of the American and Israeli strikes—which the EU has largely supported—may spark frictions that slow down this traversal lane, such as the implementation of sanctions targeting South African ports along the Cape.

“The Red Sea is another pressure point that could strangle trade routes to Europe,” Doueik said. “Combined with Gulf instability, it heightens the risk to European energy markets and living costs.”

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