Working Paper Series no. 1057. Who bears the cost when a maritime chokepoint is disrupted? Combining ship-level AIS trajectories, port-call logs, freight indices, customs data and Turkish shipment-level data, we document the trade effects of the 2023 Red Sea crisis: seaborne trade between affected country pairs fell, rerouted around the Cape of Good Hope, and recovered within months as freight costs surged, while some exporters shifted persistently toward air freight. We build a quantitative trade model in which freight costs are endogenous to modal and route choice through congestion, a global shipping capacity constraint, and monopoly toll-setting by canal authorities. Calibrated to observed route choices and canal revenues, the model implies that a permanent Red Sea closure lowers global real income only mildly. Because the Suez Canal Authority, pricing to maximize revenue, already captures much of the route's surplus, the loss falls on the toll collector: Egypt forgoes 3.0 percent of real income, almost all of it canal rent, while the large trading economies each lose less than 0.02 percent. A transit fee on the Strait of Hormuz, a chokepoint without maritime substitutes, instead concentrates losses on the Gulf economies themselves. Whether a chokepoint has substitutes, and who prices it, jointly determine who pays for its disruption.
Seaborne trade flows under a permanent Red Sea closure
Non-Technical Summary
Maritime trade depends on a small number of narrow passages, but chokepoints that look similar on a map can be economically very different. Suez and Panama offer long but feasible detours; Hormuz places the Gulf economies close to a maritime dead end; and some passages are priced infrastructures whose operators collect tolls. This paper asks how substitute routes, interactions between chokepoints and the pricing of passage determine the effects of disruption on trade, freight costs and real income.
The 2023 Red Sea crisis provides direct evidence. The authors combine ship-level position and port-call records with freight indices, maritime-distance measures, monthly customs data for the European Union and the United States, and shipment-level Turkish customs records. Following the first Houthi attacks in November 2023, transits through the Red Sea collapsed by two thirds, traffic around the Cape of Good Hope increased and travel times lengthened. Sea trade between country pairs dependent on Suez fell by more than 10 percent relative to unaffected pairs, but recovered within months as carriers reorganized routes. Turkish firms show the same two-speed adjustment: maritime exports to via-Suez partners fell by 5 percent starting three weeks after the first attack, then recovered within a quarter. The air share of their exports subsequently increased by 0.7 percentage point on average, reaching 1.4 points above the comparison group after ten weeks.
To interpret these facts, the paper develops a multi-country, multi-sector quantitative trade model with endogenous transport costs. Shippers choose across modes and routes; rerouting creates congestion on alternative passages; longer voyages tighten global shipping capacity; and canal authorities set monopoly tolls. The model is disciplined by observed route choices, sectoral transport patterns and canal revenues. It reproduces the Suez Canal Authority's $10.3 billion of toll revenue in 2023.
The first counterfactual closes the Red Sea route permanently. Seaborne flows rise by about 18 percent around the Cape of Good Hope and 20 percent through Panama. Global real-income losses remain mild because alternative routes exist and freight represents only a modest share of the delivered value of most goods. The large European and Asian trading economies each lose less than 0.02 percent. Egypt bears by far the largest loss, 3.0 percent of real income: 2.8 percentage points come directly from the disappearance of Suez toll rents, while only 0.3 point reflects the residual trade-cost and general-equilibrium effects.
A comparison with a no-toll baseline clarifies the incidence. Without Suez and Panama rents, Egypt's loss falls to 0.2 percent, while losses become larger for economies whose cargo must travel farther: Qatar's loss rises from 0.2 to 1.1 percent, for example. Removing the rents leaves the global cost of closure broadly similar but spreads the burden away from the collector and towards route users. The toll therefore cushions shippers against the detour while making the Canal Authority the residual bearer of disruption risk.
The contrast with the Strait of Hormuz is stark: Gulf economies have no maritime detour. At the intermediate transit fee considered in the paper, which raises freight costs on exposed trade by 35 percent, real income falls by 3.9 percent in Qatar, 2.7 percent in Kuwait, and 2.5 percent in Iraq, while Hormuz-transiting trade declines by 60 percent. Although toll revenue is split equally in our exercise, Oman gains 12.2 percent and Iran only 1.5 percent because their exposure to the disruption differs sharply. Large third countries experience only limited losses. This incidence pattern partly reflects the model’s high long-run elasticities of substitution: importers can shift demand toward unaffected suppliers at relatively low cost, pushing much of the burden onto Gulf producers through lower pre-fee export prices and reduced sales. Competing oil and gas exporters consequently expand production, such as Brunei that experiences 0.8 percent gain in real income. These results should be interpreted as long-run equilibrium effects; short-run costs to importers could be larger when substitution across suppliers is slower or more constrained.
Vulnerability depends not only on transit volumes, but also on the availability of alternative suppliers and routes and on who controls and prices the passage.
Keywords: Shipping Routes; Chokepoint Disruptions; Red Sea Crisis; Endogenous Trade Costs; Monopoly Tolls.
Codes JEL: F14, F17, R41, F62
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Updated on the 6th of August 2026