On Wednesday, Mr Shapps said: “Be in no doubt at all Iran is guiding what is happening there in the Red Sea, providing them not just with equipment to carry out those attacks but also often with the eyes and ears to allow those attacks to happen.
“We must be clear with the Houthis, that this has to stop and that is my simple message to them today and watch this space.”
It follows growing global concern about the disruption in the key global shipping route.
The Houthis claim the attacks are a response to the Israeli bombardment of Gaza.
‘Consequences’
Mr Shapps also posted on Twitter: “Overnight, HMS Diamond, along with US warships, successfully repelled the largest attack from the Iranian-backed Houthis in the Red Sea to date.
“Deploying Sea Viper missiles and guns, Diamond destroyed multiple attack drones heading for her and commercial shipping in the area, with no injuries or damage sustained to Diamond or her crew.
“The UK alongside allies have previously made clear that these illegal attacks are completely unacceptable and if continued the Houthis will bear the consequences.
“We will take the action needed to protect innocent lives and the global economy.”
Antony Blinken, the US Secretary of State, also warned of a response on Wednesday.
“I’m not going to telegraph or preview anything that might happen,” he said
“All I can tell you again, we’ve made clear – we’ve been clear with more than 20 other countries – that if this continues, as it did yesterday, there will be consequences. And I’m going to leave it at that.”
Some major shipping lines and oil giant BP have already diverted vessels around southern Africa, adding time and costs to journeys, rather than risk the Red Sea.
On Wednesday, the UN Security Council passed a resolution demanding an immediate end to the Houthi attacks - and endorsed the right of UN member states to defend their vessels.
The UN resolution demanded “that the Houthis immediately cease all such attacks, which impede global commerce and undermine navigational rights and freedoms as well as regional peace and security”.
Eleven nations voted for it, but Russia, China, Mozambique and Algeria abstained.
The International Chamber of Shipping says 20 per cent of the world’s container ships are now avoiding the Red Sea and using the much longer route around the southern tip of Africa instead.
More follows