Risk and Resilience: Quantifying the Threat to Indian Ocean Supply Chains in 2025

By Rahul Guhathakurta

Cover Image Attribute:The MV Rubymar, a Handymax-size bulk carrier registered under the flag of Belize, sank on 2 March 2024 following a strike, marking the first ship to be lost as a result of a Houthi attack during the conflict. / Source: Khaled Ziad/AFP via Getty Images

The Indian Ocean supply chain, a vital artery of global trade connecting Asia, Africa, and Europe, faces unprecedented challenges due to cascading disruptions in the Red Sea, a critical chokepoint linking the Indian Ocean to the Mediterranean via the Suez Canal. These disruptions stem from Houthi activities in Yemen, the resurgence of Somali piracy, and the broader instability tied to the Israel-Hamas conflict, which has reverberated across the region. As of March 2025, these factors have coalesced into a perfect storm, threatening the stability of maritime commerce, inflating shipping costs, and forcing companies to reassess their operational risk thresholds. This article analyzes these challenges through a narrative lens, weaving together recent events and quantitative data to assess the risks and determine when continued shipping through this corridor becomes untenable.
The Red Sea, a narrow waterway bordered by Yemen to the east and the Horn of Africa to the west, serves as a linchpin for approximately 12% of global trade and 30% of container traffic, according to estimates from maritime analysts. Its strategic importance is amplified by the Suez Canal, which facilitates the quickest sea route between Asia and Europe. However, since late 2023, this corridor has been plagued by Houthi attacks, launched in solidarity with Palestinians amid the Israel-Hamas conflict. The Houthis, an Iran-backed rebel group controlling much of northern Yemen, have executed over 100 attacks on shipping since November 2023, including missile strikes, drone assaults, and small boat operations. A notable incident occurred on March 20, 2025, when the Houthis fired a hypersonic missile targeting Israel’s Ben Gurion Airport, intercepted by the Israeli Air Force before entering Israeli territory. This attack, reported by Al Jazeera, followed the collapse of a fragile ceasefire in Gaza, signaling a renewed escalation. Earlier, on January 6, 2025, the Houthis targeted the USS Harry S. Truman aircraft carrier in the Red Sea with missiles and drones, as claimed by Houthi spokesperson Yahya Sarea, though the U.S. military has not confirmed damage. These incidents illustrate the Houthis’ growing capability and willingness to disrupt maritime traffic, with their arsenal—bolstered by Iranian support—posing a persistent threat.
The economic fallout from these attacks has been profound. By mid-2024, Suez Canal tolls dropped 60%, costing Egypt billions in revenue, as reported by EL PAÍS English. Shipping companies, wary of the risks, have rerouted vessels around the Cape of Good Hope, adding up to two weeks and 30% to transit costs. This detour has strained the Indian Ocean supply chain, as ports along the eastern coast of Africa and in South Asia face increased congestion while fuel and insurance costs soar. The Houthi campaign, initially targeting Israeli-linked ships, has expanded to include vessels with tenuous or no connections to Israel, sinking two ships and killing four sailors since the conflict’s onset. This unpredictability compounds the risk, as companies cannot reliably predict which vessels will be targeted, undermining confidence in the Red Sea route.
Compounding this instability is the resurgence of Somali piracy, a menace that had largely subsided over the past decade due to international counter-piracy efforts. The Houthi attacks, however, have diverted naval resources—such as U.S., UK, and European warships—from the Indian Ocean to the Red Sea, creating a security vacuum that pirates have exploited. A Yahoo report from February 22, 2025, highlights this shift, noting that Somali pirates hijacked the Maltese-flagged MV Ruen in December 2023, their first major success in years, following nearly 190 Houthi strikes between November 2023 and October 2024. Maritime intelligence from Lloyd’s List warns of expanding ties between Somali pirates, the Houthis, and other regional actors, potentially forming a coordinated threat to Indian Ocean shipping lanes. Unlike the Houthis, whose actions are ideologically driven, Somali pirates operate for profit, targeting vulnerable vessels rerouted from the Red Sea into pirate-prone waters off the Horn of Africa. This dual threat—ideological militancy in the Red Sea and opportunistic piracy in the Indian Ocean—stretches shipping companies’ risk management capabilities, as they must now contend with both high-tech missile attacks and traditional hijackings.
The Israel-Hamas conflict, reignited with Hamas’s October 7, 2023, attack on Israel and intensified by subsequent Israeli military operations in Gaza, underpins much of this disruption. The conflict’s escalation in early 2025, marked by the ceasefire’s collapse on March 19, as reported by NPR, has fueled Houthi aggression and destabilized the region. Israel’s retaliatory strikes in Gaza, killing key Hamas figures, and U.S. airstrikes on Houthi targets in Yemen—ordered by President Donald Trump and killing 53 people on March 15, per Al Jazeera—have heightened tensions. These military actions, while aimed at restoring order, have instead amplified the chaos, as the Houthis vow retaliation, including expanded missile and drone campaigns. The conflict’s ripple effects extend to the Suez Canal, where traffic has plummeted due to shipping companies’ reluctance to risk the Red Sea approach. A New York Times report from January 20, 2025, notes that even with a brief Houthi pause in attacks following a Gaza ceasefire in January, carriers remain cautious, unwilling to resume normal operations without guarantees of long-term safety.
To quantify these risks, incident data provides a stark picture. Since November 2023, the Houthis have launched approximately 400 missiles and drones at Israel and Red Sea shipping, with Israel intercepting most—such as the March 20 missile targeting Ben Gurion Airport—yet suffering sporadic damage. In the Red Sea, over 100 merchant vessels have been attacked, with two sunk and one seized. Somali piracy, though less prolific, has seen at least five confirmed hijackings since late 2023, according to maritime security firm Marisks, with the MV Ruen incident signaling a renewed threat. These figures translate into a daily disruption cost of $200 million to global trade, with the Indian Ocean supply chain bearing a disproportionate burden due to its reliance on the Suez route. Insurance premiums, a key indicator of perceived risk, have risen from 0.01% to 0.5% of a vessel’s value in some cases—a 500-fold increase—reflecting the market’s assessment of the corridor’s volatility.
Assessing these risks requires establishing a threshold beyond which shipping becomes untenable. Using incident frequency, economic impact, and operational feasibility, a quantitative risk model can be constructed. 
Let’s define the risk index (RI) as a function of attack frequency (AF), successful attack rate (SAR), and cost escalation (CE), normalized against a baseline of pre-disruption operations: RI = (AF × SAR × CE) / 100. 
For the Red Sea, AF is approximately 0.18 attacks per day (400 incidents over 2,200 days since November 2023), SAR is 0.03 (three successful attacks—two sunk, one seized—out of 100), and CE is 1.4 (40% cost increase from rerouting). This yields an RI of 0.00756. 
For the Indian Ocean piracy zone, AF is 0.0023 (five hijackings over 2,200 days), SAR is 1.0 (all attempts succeeded), and CE is 1.2 (20% cost increase from additional security), resulting in an RI of 0.00276. 
Combined, the total RI is 0.01032, or 1.032% of baseline risk.
Historical benchmarks suggest that shipping companies tolerate a risk index (RI) up to 0.5% before rerouting becomes standard practice, as observed during the peak of Somali piracy in 2008–2012, when insurance premiums rose similarly. The current RI of 1.032% exceeds this threshold by more than double, indicating that the Red Sea-Indian Ocean corridor is already beyond the point of operational viability for many firms. This is evidenced by the diversion of 18% of global container capacity—approximately 4.3 million containers—around Africa by December 2023. As of now, businesses face a stark choice: absorb escalating costs and risks or abandon the corridor entirely. For companies still braving the route, the tipping point likely occurs when the RI reaches 1.5%, where daily losses and insurance costs outstrip profit margins, a scenario projected with an additional 50 attacks or a 10% successful attack rate over the next six months. With the RI already surpassing tolerable levels, abandoning the corridor is increasingly the default, signaling a prolonged disruption to one of the world’s most critical trade networks. Until regional stability is restored, the Indian Ocean supply chain will remain a casualty of this multifaceted crisis.

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