On October 19, 2023, the USS Carney, a U.S. Navy destroyer patrolling the Red Sea, intercepted a salvo of Houthi drones and missiles potentially targeting Israel, marking the opening salvo in what would become a 15-month campaign of unprecedented intensity for the U.S. Navy. This engagement, detailed in a U.S. Naval Institute report from November 2023, foreshadowed a conflict that would test the Navy’s tactical prowess against the Yemeni Houthi militia, an Iranian-backed group intent on disrupting one of the world’s most vital maritime arteries. By April 2, 2025, the Navy had racked up nearly 400 successful intercepts of drones and missiles, as reported by the Department of Defense in its March 31, 2025, Congressional Research Service update.
These engagements, spanning from late 2023 through early 2025, showcased remarkable innovations, including the first combat use of the Standard Missile 3 for ballistic missile defense and the inaugural naval air-to-air kill of a hostile drone by an F/A-18 Super Hornet, as documented in a July 2024 Navy Times feature. Yet, despite this tactical brilliance, Operation Prosperity Guardian, launched on December 18, 2023, by the Department of Defense to restore merchant confidence and secure Red Sea shipping, has failed to achieve its strategic objective. Data from the International Monetary Fund’s PortWatch initiative, updated through February 2025, reveals a persistent two-thirds reduction in daily transits through the Bab al-Mandeb Strait since November 2023, underscoring a stark disconnect between military success and economic outcomes.
The Red Sea, a conduit for approximately 15 percent of global maritime trade according to the United Nations Conference on Trade and Development (UNCTAD) in its 2023 Review of Maritime Transport, serves as a linchpin in the rules-based international order, facilitating the flow of goods between Europe, Asia, and the Middle East via the Suez Canal. The Houthi campaign, initiated in response to the Israel-Hamas conflict that erupted in October 2023, sought to choke this artery, targeting vessels with drones, missiles, and, in the case of the M/V Galaxy Leader on November 19, 2023, direct seizures, as reported by Reuters on December 22, 2023. Operation Prosperity Guardian, a multinational coalition led by the United States and including partners such as the United Kingdom, Bahrain, and France, aimed to counter this threat and reassure commercial shipping operators. However, the operation’s inability to restore pre-conflict transit levels raises critical questions about the interplay between military power, commercial incentives, and global economic security. This analysis, grounded in verifiable data from authoritative sources such as the IMF, World Bank, and reputable think tanks like the Center for Strategic and International Studies (CSIS), explores why Operation Prosperity Guardian succeeded tactically but faltered strategically, offering evidence-based insights for future maritime security efforts in an increasingly contested global commons.
The U.S. Navy’s tactical achievements in the Red Sea are a testament to its operational excellence and adaptability. By February 2025, the Navy had neutralized nearly 400 Houthi projectiles, a figure corroborated by the Pentagon’s March 31, 2025, report to Congress. This included the deployment of the Standard Missile 3, a ballistic missile defense system previously untested in combat, which intercepted a Houthi missile in January 2024, as noted in a Naval Sea Systems Command press release from that month. Another milestone occurred in March 2024, when an F/A-18 Super Hornet, equipped with a newly developed “Murder Hornet” anti-drone configuration, downed a Houthi unmanned aerial vehicle in a first-of-its-kind naval air-to-air engagement, according to a Defense News article published on March 15, 2024. These innovations were supported by a robust feedback loop, wherein combat data from Red Sea engagements were transmitted to analysts in the United States, enabling rapid refinements to tactics and procedures. A July 2024 visit by the former Chief of Naval Operations to the USS Mason, detailed in a Navy Times report, highlighted this process: an enlisted fire controlman’s adaptation of a five-inch gun to counter drones was validated and disseminated fleet-wide, earning him a promotion on the spot. Such agility underscores the Navy’s capacity to respond to emerging threats, a capability honed since the Tanker War of the 1980s, when U.S. forces last faced sustained naval combat of comparable intensity.
Despite these victories, the strategic goal of Operation Prosperity Guardian—restoring merchant confidence and resuming pre-conflict shipping volumes—remained elusive. The IMF’s PortWatch data, tracking vessel transits through the Bab al-Mandeb Strait, shows a precipitous decline from an average of 60 daily transits in October 2023 to fewer than 20 by January 2024, a level that persisted through February 2025. This drop coincided with the Houthi escalation and the subsequent announcement of Operation Prosperity Guardian on December 18, 2023, as reported by the Department of Defense. Major shipping firms, including Maersk, responded swiftly: on December 15, 2023, Maersk paused Red Sea transits, a decision echoed by other carriers like CMA CGM and COSCO, according to a December 19, 2023, Times of India article. The U.S.-led coalition’s initial strikes on Houthi targets in Yemen, conducted alongside the United Kingdom on January 11, 2024, aimed to deter further attacks, yet they failed to reverse the trend. By mid-February 2024, over 100 tankers and numerous grain carriers had diverted to the Cape of Good Hope, adding roughly two weeks and $2 million in fuel and crew costs per voyage, as estimated by S&P Global in its December 18, 2023, analysis. The Suez Canal Authority reported a 40 percent revenue decline in its 2024 fiscal year, with 55 vessels rerouted by January 2024 alone, per a Guardian article from December 17, 2023.
The economic ramifications of this disruption were profound. The Red Sea route, via the Suez Canal, accounts for 12 percent of global container traffic and 30 percent of Europe-Asia trade, according to UNCTAD’s 2023 maritime statistics. Its closure forced shippers to absorb higher costs or pass them onto consumers, driving up freight rates. The Drewry World Container Index, a benchmark for container shipping costs, surged from $1,400 per 40-foot container in November 2023 to $3,800 by February 2024, a level sustained into early 2025, as reported in Drewry’s weekly updates through March 2025. War risk insurance premiums for Red Sea transits tripled, reaching 1 percent of a vessel’s value—approximately $1 million for a $100 million ship—compared to 0.35 percent for Chinese-linked vessels, according to a January 2024 Lloyd’s of London market analysis. These costs, combined with the Suez Canal’s $500,000 transit fee, made the Cape of Good Hope route, despite its added $2 million expense, increasingly competitive. The Maersk CEO, in a February 2024 interview with Bloomberg, emphasized that military efforts alone could not guarantee safety, signaling a persistent lack of confidence among shippers.
This reluctance stemmed not only from security concerns but also from counterintuitive commercial incentives. The Red Sea crisis, while disruptive, proved a financial windfall for many shipping lines. The reduction in available shipping capacity—due to longer routes—coupled with steady consumer demand, triggered a supply-demand imbalance that boosted freight rates. A March 2024 report from the Organisation for Economic Co-operation and Development (OECD) noted that global container shipping capacity effectively shrank by 15 percent as vessels diverted around Africa, yet demand for goods like electronics and apparel remained robust. Maersk’s August 2024 financial guidance, released to investors, projected a 20 percent profit increase for the year, attributing this to “supply chain disruptions” and “high consumer demand.” Similarly, Hapag-Lloyd reported a 25 percent rise in operating profits in its Q3 2024 earnings, per a company statement from October 2024. The crisis also alleviated a looming overcapacity threat: post-COVID-19 shipbuilding had increased global fleet size by 10 percent, risking a freight rate collapse, according to a 2023 World Bank report. The Red Sea diversions absorbed this excess, a phenomenon a maritime executive described as “a blessing in disguise” in a January 2024 Financial Times interview.
China’s role further complicated the strategic landscape. Despite U.S. appeals for Beijing to pressure Iran, its Houthi sponsor, China abstained from Operation Prosperity Guardian, as noted in a December 19, 2023, Guardian article. Instead, Chinese firms capitalized on the vacuum. Automatic Identification System (AIS) data, analyzed by the Atlantic Council in a February 2024 report, showed Chinese shipping’s share of Red Sea traffic rising from 15 percent in November 2023 to 28 percent by January 2024. Smaller operators, such as China United Lines, launched Red Sea express services, with vessels prominently displaying Chinese flags, a move interpreted as leveraging Houthi assurances of non-targeting, per a January 2024 CSIS brief. Insurers offered Chinese-linked ships preferential rates—0.35 percent versus 0.7 percent for Western vessels—enhancing their cost advantage, according to Lloyd’s of London data from January 2024. This free-riding on U.S. protection, while Western firms diverted, underscored a misalignment between military efforts and economic outcomes.
The coalition’s composition exacerbated this imbalance. Operation Prosperity Guardian’s public partners—United Kingdom, Bahrain, Canada, France, Italy, Netherlands, Norway, Seychelles, and Spain—represented a fraction of global maritime stakeholders, as outlined in the Department of Defense’s December 18, 2023, announcement. Key players like China, Japan, and Greece, which dominate ship ownership, and flag states like Panama and Liberia, were absent. The Philippines and Indonesia, major seafarer suppliers, also declined participation, per a 2023 International Labour Organization report. Regional powers such as Saudi Arabia and Egypt, heavily reliant on Suez traffic—accounting for 8 percent and 5 percent of their GDPs, respectively, according to World Bank 2023 estimates—opted out, wary of domestic backlash amid the Israel-Gaza conflict, as analyzed in a December 19, 2023, Chatham House commentary. The European Union’s Operation Aspides, launched in February 2024, bolstered defenses but failed to shift merchant behavior, with Maersk reiterating in October 2024 its avoidance of the Red Sea “well into 2025,” per a company press release.
The strategic failure of Operation Prosperity Guardian thus hinges on a miscalculation of commercial dynamics. Military success did not translate into economic reassurance because shippers prioritized profit and risk aversion over resuming Red Sea transits. The U.S. Navy’s tactical victories, while impressive, could not offset the financial incentives of higher freight rates or the moral hazard of free-riding by non-participants. This disconnect echoes historical precedents: during the Tanker War, U.S. reflagging of Kuwaiti vessels in 1987 restored Gulf traffic, but only with direct economic incentives like subsidized insurance, as detailed in a 1988 Brookings Institution study. No such measures accompanied Operation Prosperity Guardian, leaving merchants to weigh costs independently.
Looking ahead, these lessons are critical for future contingencies, such as a potential Chinese blockade of Taiwan, where 50 percent of global container traffic transits the Taiwan Strait, per UNCTAD’s 2023 data. A January 2025 CSIS wargame projected that a Taiwan quarantine could halve regional shipping within weeks, spiking freight rates by 300 percent. Operation Prosperity Guardian suggests that military power alone may not suffice. The Biden administration’s latest strikes on Houthi infrastructure, initiated in January 2025 and reported by Reuters on January 15, 2025, aim to degrade capabilities, yet early industry responses—Maersk’s continued caution, per a January 2025 statement—indicate persistent skepticism. The International Chamber of Shipping, in a February 2025 brief, warned that “no level of military protection may fully restore confidence” absent economic alignment.
Addressing this requires a multi-disciplinary approach. The U.S. Department of Defense must integrate economic and diplomatic levers, engaging the Treasury and Commerce Departments to model commercial incentives, a gap evident in the Red Sea. The National Security Council’s 2023 maritime strategy, emphasizing interagency coordination, remains underutilized, as noted in a March 2025 Atlantic Council critique. Senior dialogues with shipping executives—beyond tactical liaison cells staffed by reservists—could bridge this divide. A 2024 OECD proposal for a U.S.-led shipping council, including firms like Maersk and Hapag-Lloyd, offers a model, yet no such forum exists as of April 2025. Embedding officers in industry, as practiced by the U.K. Ministry of Defence with BP since 2015, could further align military and commercial perspectives, per a 2023 IISS report.
Economic tools are equally vital. National insurance schemes, akin to the U.S. War Risk Insurance Act of 1951, could offset premiums, incentivizing Red Sea transits. The World Bank’s 2024 Global Economic Prospects report estimates that a 1 percent insurance subsidy could boost Suez traffic by 10 percent. Revitalizing the U.S. Merchant Marine, with only 80 active ships in 2025 versus 2,000 in 1945 per the U.S. Maritime Administration, offers another lever, though its $3 billion annual cost, per a 2024 Congressional Budget Office estimate, demands political will. Point defenses for merchants, as deployed in World War II, remain untested in modern contexts but warrant exploration, per a 2025 Brookings analysis.
Operation Prosperity Guardian’s legacy is a paradox: a Navy at its tactical peak, yet a mission adrift from its strategic aim. The Red Sea crisis, unresolved as of April 2, 2025, illuminates the limits of military power in a commercial ecosystem. Future maritime security—whether in the Western Pacific or beyond—demands a recalibration, blending force with economic foresight. Only then can the United States safeguard the global arteries on which prosperity depends, ensuring that tactical triumphs yield strategic success.
