Red Sea closure costs Egypt 3 percent as global trade adapts

A quantitative trade model by researchers at the Banque de France, Kiel Institute, and Bielefeld University analyzes the economic fallout of maritime route disruptions.

Calibrated to the Suez Canal Authority's 10.25 billion dollar toll revenue in 2023, the model shows that a permanent Red Sea closure diverts seaborne traffic by 18 percent around the Cape of Good Hope and 20 percent through Panama.

Global real income losses remain negligible, with major European and Asian trading nations each losing less than 0.02 percent.

Egypt bears the burden with a 3.0 percent fall in real income, of which 2.8 percentage points represent lost canal rents.

Because revenue-maximizing tolls already extract route surplus, closure costs fall primarily on the toll collector rather than shippers.

The study contrasts Suez with the Strait of Hormuz, where Gulf economies lack maritime detours.

An intermediate transit fee of 35 percent reduces exposed trade by 60 percent, cutting real income by 3.9 percent in Qatar, 2.7 percent in Kuwait, and 2.5 percent in Iraq.

Meanwhile, Oman gains 12.2 percent from fee collection because its own trade bypasses the strait.

Granular Turkish customs data confirms that while initial maritime export drops recovered within a quarter, shippers permanently increased their air freight share by up to 1.4 percentage points to bypass route volatility.