Red Sea Shipping Faces Uncertain Future as Houthi Ceasefire Brings Hope—and Caution

The Houthi militant group’s announcement of a suspension of maritime operations in the Red Sea has sent ripples through the global shipping industry, offering potential relief to an industry battered by nearly two years of attacks—but experts warn that a swift return to normalcy remains far from certain.

The suspension, announced through a formal letter to Hamas’s military wing by newly appointed Houthi Chief of Staff Yousef Hassan Al Madani, marks a significant shift following the fragile peace deal between Israel and Hamas in October. The letter was first reported by the Associated Press.

The move indicates the Iranian-backed group has potentially moved to formally end its naval blockade of Israeli ports and attacks against vessels previously targeted over perceived links to Israel have now ceased. Thus far, however, the group has not offered any formal acknowledgment of the suspension.

Peter Sand, Chief Analyst at Xeneta, emphasized the magnitude of what a large-scale return to the Red Sea could mean for the container shipping industry. “Details are sketchy and you cannot base the safety of crews, ships and cargo on the word of Houthi militia,” Sand said. “Carriers need far more assurance than that and, perhaps more importantly, so do insurance companies.”

According to Xeneta, diversions around the Cape of Good Hope continue to absorb approximately 2 million TEU of global container shipping capacity, with analyst John McCown estimating that the crisis has reduced global shipping capacity by 8%. A large-scale return to the Red Sea would flood the market with capacity, worsening the sector’s hidden overcapacity problem and driving container freight rates lower.

“Average spot rates from Far East to North Europe, Mediterranean and US East Coast—three trades that would ordinarily transit the Red Sea—are all down more than 50% since the start of year,” Sand noted. “A large-scale return of container ships to the Red Sea would flood the market with capacity and cause freight rates to plunge even lower across trades at a global level, not just those directly impacted by the diversions.”

The Drewry World Container Index (WCI) rose 8% to $1,959 per 40ft container last week, the fourth consecutive weekly increase following China’s Golden Week after 17 weeks of decline. The uptick comes as Asia–Europe carriers are implementing higher FAK rates to boost spot rates ahead of annual contract negotiations. However, Drewry forecasts weakening supply-demand balance will push spot rates lower in coming quarters.

Maritime security experts are urging operators to proceed with extreme caution. Martin Kelly, Head of Advisory at EOS Risk Group, stressed that the risk reduction should not be mistaken for complete elimination. “As of 11 November, the risk of Houthi attacks against shipping in the Red Sea and Gulf of Aden and broader region is significantly lower,” Kelly said. “However, despite the declared pause, the Houthis retain the capability to conduct missile, drone, and USV attacks against commercial shipping.”

The conditional nature of the suspension adds another layer of uncertainty. In his letter, Al Madani made clear that attacks could resume if Israel resumes aggression against Gaza. “We are closely monitoring developments and declare that if the enemy resumes its aggression against Gaza, we will return to our military operations deep within the Zionist entity, and we will reinstate the ban on Israeli navigation in the Red and Arabian Seas,” Al Madani stated.

Since the attacks began following the October 2023 outbreak of the Israel-Hamas conflict, the Houthis have targeted more than 100 merchant ships traveling through the Red Sea, sinking four vessels, seizing another, and killing at least eight seafarers.

The Suez Canal Authority has reported encouraging signs of recovery, with October marking the highest monthly rate of returning vessels since the crisis began. Chairman Admiral Ossama Rabiee announced that 229 vessels returned to the waterway during October alone.

CMA CGM has led the charge in returning to the route among major ocean carriers, with the giant containership CMA CGM BENJAMIN FRANKLIN—capable of carrying 17,859 containers—recently completing its first transit through the Suez Canal and Bab el-Mandeb Strait, becoming the largest containership to transit the route since the blockade began.

“There is no alternative to the Suez Canal,” said CMA CGM CEO Tariq Zaghloul, expressing confidence in the route’s future.

However, significant obstacles remain. High marine insurance costs continue to be significant obstacle and a major reason for the delay in many major shipping lines resuming voyages through the Suez Canal.

Sand warned that shippers need to prepare for potential disruption. “Carriers are already heading into loss-making territory and freight rates are expected to fall up to -25% globally in 2026, even with no change to the situation in the Red Sea,” he said. “Shippers should be making contingency plans because a large-scale return would cause severe disruption across global ocean supply chains as services transiting Suez Canal are reinstated.”

Kelly advised that maritime operators should continue to treat the risk as suppressed rather than removed, particularly for vessels linked to Israel, its allies, or perceived Western interests. As western officials had not yet confirmed the suspension as of the announcement, the industry faces a waiting game that could have seismic implications for global trade.

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