Modeling the Impact of Houthi Attacks on Red Sea Trade Routes with the GEO-SHIP Framework

Abstract

This study aims to assess the multi-dimensional effects of geopolitical conflict on global maritime trade, with a focus on three critical chokepoints: the Bab el-Mandeb Strait, the Suez Canal, and the Cape of Good Hope. The research seeks to evaluate how these routes absorb and transmit shock effects arising from conflict-related disruptions. This study introduces a novel analytical framework named geopolitical shock impact profiling (GEO-SHIP), which integrates three complementary methodologies: structural break time-series modeling (ARIMAX), difference-in-differences (DiD), and event synchronization matrix (ESM) analysis. The approach is applied to proprietary, high-frequency data on trade volumes and vessel transits collected between December 2023 and March 2025. The results demonstrate a statistically significant and sustained decline in both cargo and tanker traffic through Bab el-Mandeb following the onset of Houthi attacks. In contrast, a marked increase in trade volume is observed along the Cape of Good Hope route, indicating a substantial rerouting of global maritime flows. The Suez Canal exhibited more moderate, fluctuating behavior, suggesting partial substitution. The findings underscore the necessity for real-time risk monitoring tools in maritime logistics and supply chain planning. The GEO-SHIP framework offers actionable insights for insurers, naval security agencies, and logistics decision-makers in adapting to rapidly evolving geopolitical threats. This study presents a systematic application of an integrated multi-method empirical framework to quantify the effects of conflict-induced disruptions on maritime trade dynamics and contributes to the literature by offering a replicable model for chokepoint-specific geopolitical risk assessment.