The Red Sea saw a relatively calm period following the ceasefire in Gaza, which seemed to quell hostilities and halt Houthi attacks. However, Israel's refusal to implement the second phase of the ceasefire and the ongoing blockade of humanitarian aid to Gaza led the Houthis to announce in March their intention to resume naval operations targeting Israeli-linked vessels. The ceasefire proved to be fragile, since yesterday Israel conducted extensive airstrikes in Gaza, in the most significant rise of hostilities since the beginning of ceasefire in January.
This development has reignited serious concerns within the shipping community regarding the security of navigating the Red Sea. The market remains cautious—and potentially even more so following the latest escalation—lacking confidence for trade restart in the area. This is reflected as well in the transit volumes still standing approximately 70% below 2023 levels, with an increasing number of bulk carriers and tankers opting to bypass Red Sea.
The recent U.S. military strikes against Houthi rebels aim to deter Iran’s influence (which supports the Houthis), protect trade flows by preventing further disruptions in Red Sea, and mitigating risks for commercial vessels navigating Suez Canal. In the mid-term, a positive outcome of this intervention could lead to a boost of confidence among shipowners who have been hesitant to navigate Red Sea, as the persistent threat posed by Houthi attacks has led to significant disruptions, forcing vessels to reroute via the Cape of Good Hope due to security risks, resulting to increase in voyage times, higher emissions and elevated operational costs.
A possible stabilization of the security and resumption of normal trade flows in the Red Sea would imply various effects for global shipping, such as:
Decrease of ton-miles: With ships returning to the Red Sea, voyage distances on key routes (such as Asia-Europe) would be shortened, resulting in reduced ton-mile demand.
Increase in active fleet availability: Shorter voyage times imply that more vessels would be quicker available again, effectively increasing the capacity of active fleet, adding to tonnage supply.
Potential downward pressure on freight rates: The reduction in ton-miles and the increase in fleet availability could place downward pressure on freight rates, particularly in sectors already grappling with a large tonnage supply and orderbook such as containerships. The Red Sea remains a critical factor for containership sector, with rerouting adding approximately 11% in overall demand.
While U.S. military strikes against Yemen’s Houthis could result to increased confidence for Red Sea trade, market players are carefully evaluating the evolving security situation and associated operational risks. Should U.S. actions succeed in compelling the Houthis to halt attacks on vessels, a period of stability could follow, potentially leading to a gradual return to normal trade routes.
Ongoing geopolitical developments in 2025 appear to be a key factor affecting the trends of shipping markets, shaping global trade flows and dynamics. While earlier estimates suggested that a gradual resumption of trade via Red Sea could take place within the second half of 2025, the recent developments have added uncertainty to this timeline, leaving the market skeptical and the path of return to normal trade patterns in the area unclear.
Data Source: Intermodal