Ask a diplomat, an analyst, or a citizen what makes Djibouti important, and the answer will be the same: its geography. For decades, the former French colony thrived on the privilege of being situated on the edge of the Bab al-Mandeb: a gateway between the Red Sea and the Indian Ocean, on the way to the Suez Canal, a chokepoint overseeing more than one-tenth of global trade. This position has attracted an unusual concentration of military bases from the world’s geopolitical players.

But in 2026, the Iran war is turning into a liability that is threatening the economic and political prospects of the “Red Sea hub” par excellence.

Djibouti’s coast stretches between Eritrea and Somalia, along the Bab al-Mandeb strait known as the “Gate of Tears.” The country relies on port activity, which account for an estimated 70 per cent of its GDP. On the political and military side, the geographic location of Djibouti has attracted eight international military bases to its soil. The US hosts 4,000 troops there, its last permanent infrastructure in Africa. China opened its first overseas military base Djibouti in 2017. France, Japan, and Italy also maintain troops there.

Such a relevance is not without risks. “As the country’s lifeline, the logistics sector dominates GDP, fills government coffers, and provides jobs,” wrote the World Bank in a recent report. Yet, the Banks warns, “this reliance on re-exports and transshipment leaves the economy exposed to global trade turbulence.” That is what is happening now.

The Iran War

The Iran war is posing three different, intersected threats to the primary “natural resource” of Djibouti. The first is looming over its port. The new Middle East crisis has shocked global trade with the paralysis of the Strait of Hormuz, the backbone of the gas and energy trade. Negotiations between the US and Iran have failed to reopen the corridor to its full capacity. Tehran had warned it could shift its offensive attention to the Bab al-Mandeb chokepoint and thus the Djibouti port. To do so, Iran can count on the support of the Houthis, the Yemeni militia that crippled Red Sea trade between 2024 and 2025. Should the negotiations collapse, such an offensive would not be unthinkable and would sink an economy that is already strained by its internal fragilities.

Despite a relatively high GDP per capita—well above £2,600 in 2024—Djibouti is plagued by a high rate of poverty and inequalities that are among the worst in the MENA area. The public debt ballooned to 72.9 per cent in 2023 and declined to 63.9 per cent in 2025, still well above the 60 per cent threshold suggested for emerging economies. The African development Bank expects a growth of around 6.5 per cent in the current year; those bullish forecasts relied on a surge in port activity that may now be hampered by Houthi attacks.

This leads to the second threat looming: the scenario of turning into a long-term military target. Djibouti has long benefited from the privilege of being perceived as a neutral actor. Not anymore. Amid the US-Iran war, the presence of the US Camp Lemonnier can turn from a geopolitical advantage to an imminent peril. “Camp Lemonnier, situated directly across the Bab al-Mandeb from Yemen where the Houthi movement retains significant missile and drone capability, now figures explicitly in threat assessments,” explains Bravin Onditi, Researcher at the HORN International Institute for Strategic Studies. “In June 2025,” Onditi says, “US AFRICOM Commander General Michael Langley told the House Armed Services Committee that a direct Houthi strike on Camp Lemonnier was ‘no longer a remote hypothetical.’”

Things look significantly more fragile now. An analyst from ACLED, a conflict database, told us that a Houthi offensive seems unlikely. But the threat itself could be enough to undermine its model. “Djibouti’s model—anchored in military rents and port-based trade—is increasingly exposed to structural risks,” states Adam Daud Ahmed, an Addis Ababa-based Horn of Africa political and security analyst.

That could lead to the third threat, one mixing the economic and political dangers in sight: the loss of the exceptional military “monopoly” of the country. Much is depending on whether Israel and the US will push further with the project of military bases in Somaliland. The first one showed up at the end of 2025, when Israel recognised the country and reportedly planned to position a military base close to the crowded—and UAE-funded—port of Berbera. The US too has repeatedly expressed interest in the hypothesis. A diplomatic source close to the Somaliland government denied a Bloomberg report about an imminent Israeli base on the country’s coast. But he also added that the US “may” proceed with one, further jeopardising the region and Red Sea stability.

Even more worryingly for Djibouti, there is another country courting Somaliland. Ethiopia’s Prime Minister, Abiy Ahmed is pining for Red Sea access and available for high-risk moves like this. At the beginning of 2024, the Ethiopian government shocked its neighbours by signing a Memorandum of Understanding with Somaliland, swapping direct access to the coast for a potential recognition of the statelet. The manoeuvre stopped after a Turkey-brokered deal with Somalia, but it would not sound odd to have it back on track now. Such moves would enflame a chaos that is already close to its peak and change the equilibrium at the intersection between the Horn of Africa and the Gulf. Djibouti could end up paying one of the highest prices, not least because more than 80 per cent of its exports from its ports go to Ethiopia.

Djibouti’s strategic location has brought it many benefits over the years, but it does not make it immune from the forces shaking up geopolitics. A blessing can also be a curse.

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