The Italians did make a number of attempts to attack British shipping through the Red Sea from their base at Massawa, now in Eritrea. These were hampered by intelligence and technical failures, as well as by the fact that the Italian squadron in the Red Sea was greatly outnumbered by the British forces that could be brought to bear on them. The Italian squadron also had restricted stocks of fuel, spare parts and ammunition, which could not be resupplied, further limiting their ability to attack British convoys.

When Italy entered the war, the Italian squadron in East Africa consisted of eight submarines, seven destroyers, two torpedo boats (small destroyers), five WWI-era motor torpedo-boats and the sloop Eritrea (designed mainly for colonial policing, but armed with four 4.7in guns). They had been called to action by a message sent on the 19th May 1940. Unfortunately, the British had intercepted this message, and had increased the strength of the RN's Red Sea Squadron. This meant that the Italians were facing two modern light cruisers, an older anti-aircraft cruiser, four modern destroyers, three sloops, and several trawlers and patrol ships. The British also stopped merchant shipping through the Red Sea from the 24th May. The first Italian ships to sortie were the submarines, which had begun to occupy their patrol stations when war was declared on the 10th June 1940.

They saw little success, and almost immediately ran into trouble. The Italian submarines had been fitted with air conditioning, to keep electronics working and help keep the ships liveable in the warm waters of the Red Sea. This air conditioning ran on the toxic chemical chloromethane. Leaks in these systems caused a number of incidents of crew poisonings; one of these incidents led to the loss of Macallé, which ran aground on the 15th June. On the 16th, the Galileo Galilei sank the Norwegian tanker James Stove, but three days later, she would be captured following a short gun battle with the trawler Moonstone, having been forced to surface by the threat of chloromethane poisoning. Intelligence either captured from the Galilei or taken from intercepted radio transmissions led to two more submarines being sunk. The first to be sunk was the Evangelista Torricelli, dispatched from Massawa to relieve the Galileo Ferraris, whose crew were suffering from chloromethane poisoning. She was attacked and damaged by British ships on the 21st. While she survived this engagement, while returning to base, she was located by the sloop Shoreham near Perim Island at the Bab el-Mandeb. The commander of the Torricelli decided to surface, as the clear water made it easy to track submerged submarines, the possibility of chloromethane poisoning was always present, and Italian shore batteries were relatively nearby, at Assab. However, Shoreham was soon reinforced by three destroyers, Kandahar, Khartoum, and Kingston. The British ships brought their firepower to bear, though the submarine proved to be a tough target, requiring nearly 700 rounds to sink. While returning to base, though, Khartoum would be sunk after one of her torpedoes exploded in its mount. The next day, the Luigi Galvani was located and sunk by the sloop Falmouth.

Following this, the British began sending convoys through the Red Sea, starting with BN1, running from Aden to the Suez on the 2nd July (southbound convoys used the designation BS). The Italian squadron made no less than six attempts to intercept these convoys between 2nd July and the end of September 1940, all unsuccessful. Submarines and aircraft were only slightly more successful, sinking one ship each in this period. The first successful interception of a convoy came on the night of the 20th-21st October, when four Italian destroyers attacked BN7. BN7 had a strong escort, with the cruiser Leander, destroyer Kimberley, three sloops (one Australian, one Indian and one New Zealander), and two minesweepers protecting its 32 cargo ships. The Italian ships divided into two groups, with the more heavily armed Leone and Pantera attempting to distract the escort, while the faster Francesco Nullo and Nazario Sauro tried to make a hit-and-run torpedo strike on the merchants. As it happened, Pantera exchanged a few fruitless rounds with the sloops Auckland and Yarra, while Leone never sighted the Allied ships. This brief exchange of fire served to alert the escort, with Leander moving to cover the convoy's exposed flank, putting her into position to intercept Nullo and Sauro. She managed to force the pair to withdraw, after another inconsequential exchange of fire. Sauro escaped unharmed, but Nullo was slowed by a mechanical failure with her rudder. This led to another engagement between Leander and Nullo, with the British ship putting a number of 6in rounds into Nullo's bridge. Nullo disengaged, and Kimberley gave chase, with Leander remaining behind to cover the convoy. Just before dawn, the two ships encountered each other off Harmil Island. Kimberley had the firepower advantage, and the element of surprise, but Nullo had support from a shore battery on the island. A brief gun battle between the two ships was brought to an end after Nullo ran aground on a reef; she would be sunk by a torpedo from the British ship shortly afterwards. This triumph was short-lived, as the shore battery managed to put a round into Kimberley's engine room, immobilising her temporarily. She would survive, though, managing to effect field repairs and limp out of range of the guns. The battle was disappointing for both sides; the Italians failed to do any damage to the convoy, while the British only managed to catch a single one of the attackers.

This action was followed by more failed interceptions. On the 3rd December, the Italians sortied but failed to encounter any Allied shipping. Another sortie planned for early January 1941 was cancelled after British bombers damaged the destroyer Daniele Manin, while on the 24th January, they made another fruitless sortie. The next sortie, targeting the 39-ship-strong convoy BN14, would actually make contact. Three destroyers, Pantera, Tigre, and Sauro, set off to attack the convoy. Sauro made first contact with the convoy, launching torpedoes and turning away. No hits were scored. Ten minutes later, Pantera would repeat this process, again to no effect. While withdrawing, Sauro would run into the British destroyer Kingston. She escaped at full speed, with no engagement occurring. This was the last attack by Italian naval forces on a British convoy in the Red Sea.

As 1941 marched on, the Allies were beginning to move in on the Italian base at Massawa. At the start of April, with the situation looking untenable, the Italian squadron began to plan a last desperate attack. The three larger ships, Leone, Pantera, and Tigre, were to raid Port Suez, while the smaller Cesare Battisti, Manin, and Sauro were to attack Port Sudan. Unfortunately for the Italians, the British had been expecting an attack in the area, and moved the air group from the carrier Eagle to Port Sudan, and stationed more destroyers at Port Suez. The first three ships set sail on the 1st April 1941, but quickly ran into disaster after Leone struck an uncharted rock and sank. The next day, the remaining ships sailed together, to strike Port Sudan. British aircraft attacked them shortly after port, to little avail. During the night, the Battisti had problems with her engines; to avoid her slowing down the flotilla, she was scuttled. At dawn, the Italians found themselves close to the port, but soon afterwards came under attack from the Fleet Air Arm squadrons at Port Sudan. The British Swordfish aircraft sank Sauro and Manin, while Pantera and Tigre fled for the Arabian coast. They were scuttled there, removing the last major surface threat to Allied shipping in the Red Sea. Despite this, the last success of the Italian East African Squadron would be its biggest. On the 8th April, while Allied troops were beginning to secure Massawa, the British cruiser Capetown was torpedoed by the old motor torpedo boat MAS 213. While Capetown would survive, she would require a year of repair; following this, she would serve mainly in secondary roles.

While the Italian surface force was finished after the capture of Massawa, the threat to Allied shipping in the Red Sea was still present. German bombers flying from Crete made a number of attacks against Allied shipping in the area, as well as mining the Suez Canal. While they sank few ships, they slowed down shipping, and required escorts to be diverted from more pressing theatres.