Brink of Conflict: How Ethiopia-Eritrea Tensions Threaten Regional Stability and Global Supply Routes

The escalating risk of conflict between Ethiopia and Eritrea has placed the Horn of Africa on the brink of a major regional war, with significant implications for global supply chains, energy markets, and foreign investment. For businesses operating in, or reliant on, the region, the economic consequences of conflict could be severe and far-reaching.

Conflict in Tigray Sparks Broader Regional Risk

Recent violent clashes in Ethiopia’s Tigray region, where Tigrayan forces aligned with the Tigray People's Liberation Front (TPLF) have attacked the federally-backed Tigray Interim Administration (TIA), threaten to reignite Ethiopia’s civil war. The risk of this local conflict evolving into a full-scale war with Eritrea is increasing, as both nations mobilise for confrontation.

In February 2025, Eritrea launched nationwide military mobilisation, while Ethiopian forces deploy along the border. Lt. Gen. Tsadkan Gebretensae, Vice President of the TIA, has warned that both countries are in the 'final stages' of war preparations, with conflict appearing 'inevitable'. European diplomats have confirmed major troop buildups, further validating this grim outlook.

Economic Impact: Rising Costs and Supply Chain Vulnerability

The economic fallout from a conflict in the Horn of Africa would not be confined to the region. It would directly impact global trade routes, especially Red Sea shipping lanes, and increase operational risks for companies involved in mining, energy, and logistics.

Key Economic Risks:

• Shipping costs through the Red Sea remain elevated due to previous Houthi attacks, and have not returned to pre-October 2023 levels.
• A war between Ethiopia and Eritrea would likely escalate maritime disruptions, as foreign powers like Iran and Russia seek to exploit regional instability, and establish military bases along the Red Sea corridor.

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Strategic Maritime Chokepoints:

• The Bab el-Mandeb Strait and Suez Canal handled 12% of global seaborne oil trade, and 8% of worldwide LNG shipments in early 2023.
• Disruptions here would directly impact energy markets, global trade logistics, and commodity prices.

Additionally, mining operations across the Horn of Africa, particularly for gold, copper, and zinc, depend heavily on secure maritime logistics for equipment imports and mineral exports. Any interruption could result in significant financial losses and supply chain bottlenecks.

Foreign Powers and Geopolitical Complexity

The region’s instability is further intensified by foreign powers with strategic interests:

• Russia seeks naval base access in the region.
• Turkey and the UAE are vying for mining concessions and port development rights.
• China has significant state-backed investments in Ethiopian mining and infrastructure projects.

For Western companies, this creates heightened geopolitical risk, as operating permissions, contract enforcement, and regulatory environments may shift rapidly with changing alliances.

Proactive Risk Mitigation Strategies for Businesses

Companies with investments or operations in the Horn of Africa must take immediate action to protect their interests and ensure business continuity in the face of potential conflict.

Recommended Actions:

• Diversify supply routes to reduce reliance on the Red Sea corridor.
• Implement robust communication protocols and local security measures.
• Develop and rehearse crisis response plans, including evacuation procedures for staff.
• Review political risk insurance and supply chain disruption cover to ensure protection, as many policies exclude conflict-related losses.
• Conduct detailed stakeholder mapping to understand which foreign powers influence local environments, and anticipate shifts in operating conditions.

Conclusion

As tensions escalate in the Horn of Africa, companies cannot afford to delay. The risk to supply chain resilience, energy security, and operational stability is growing. By taking proactive mitigation steps now, businesses can safeguard assets, personnel, and financial performance in an increasingly volatile region.