US, Iran trade more strikes near Hormuz as Houthis threaten to reinstate Red Sea blockade

More fighting, but the ceasefire is fine? Iran exchanged yet more attacks with US and its neighbors in the region yesterday and overnight, starting with Iran shooting down a US Army Apache near the coast of Oman yesterday. Washington launched retaliatory strikes last night in what it called “a proportional response to unjustified Iranian aggression,” hitting air defense, ground control stations, and surveillance radar sites near the Strait of Hormuz. The Islamic Revolutionary Guard Corps responded by attacking US bases in Bahrain and Jordan, as well as Kuwait.

Despite the back-and-forth hits, Washington reportedly thinks peace talks won’t be negatively affected, according to officials. Still, the negotiations are fraught at best, particularly as the talks between Israel and Lebanon — which Iran has made clear is a requirement for its own peace agreement — is still up in the air. Lebanese President Joseph Aoun made a direct appeal earlier this week to Israel to come to the negotiating table for a non-aggression pact (not a full peace deal) rather than pushing ahead with its military aggression against Lebanon.

The shaky peace talks are reviving a long fraught risk for global shipping and energy markets: A blockade of Bab Al Mandab. Yemen’s Houthis threatened on Monday to reinstate its policy of attacking Israel-linked vessels — a threat that was broad and unpredictable enough to bring a major halt to shipping through the Red Sea chokepoint for almost two years previously.

REMEMBER- Houthis sat on the sidelines for most of the US-Israel-Iran escalation over the last three months, with pundits saying early in the conflict that Iran was keeping the Yemeni militant group on the sideline as a strategic winning card if things get bad. During Israel’s war on Gaza, the Houthis attacks saw global carriers divert vessels en-masse away from the Red Sea to the longer route around the Cape of Good Hope.

What this means for the Suez Canal and Asia: The Suez Canal could regain GCC-Asia flows of critical goods that must keep moving — like Saudi crude, GCC fertilizers, aluminum, and food — even as Europe-Asia carriers again reroute via the Cape of Good Hope. Asia gets the worst of it: Higher costs and longer lead times across both corridors. Big shippers are risk-averse and shift quickly — which is easier now given surplus capacity due to new deliveries, as our LogisticsAM desk previously reported. If the Houthis do launch an attack, both GCC-Asia and Europe-Asia flows hit Suez or the Cape almost overnight.