Global shipping crisis deepens as Red Sea becomes dangerous zone

The Red Sea shipping crisis continues to deepen as shipping lines avoid the region, driving up insurance costs and causing major losses to the Suez Canal.

container shipping

Cargo ships pass through the Suez Canal. Photo: iStock/IgorSPb/Phaata

While it looked like the Red Sea shipping route would soon be restored by early 2025, much of the global commercial fleet is now expected to stay away from Yemeni waters for the foreseeable future as the security situation in the region continues to deteriorate.

Escalating conflict in the Middle East and the threat to shipping

The Israeli military has launched large-scale airstrikes on the Gaza Strip after talks to extend the ceasefire collapsed – the most significant escalation since the ceasefire began on January 19.

Following this development, Yemen’s Houthi rebels are expected to take more aggressive action at sea, particularly in response to Israel’s actions and new US airstrikes on Yemen.

Houthi leader Abdul Malik al-Houthi said his forces would attack US ships in the Red Sea in response to the ongoing US airstrikes on Yemen over the weekend.

On March 18, the Houthis attacked a US aircraft carrier strike group, marking the third such attack in just 48 hours.

Earlier this month, the Houthis said they would continue to attack ships linked to Israel, citing Israel’s refusal to allow humanitarian aid into Gaza.

Impact on shipping and insurance costs

Jack Kennedy, country risk specialist for the Middle East & North Africa (MENA) region at S&P Global Market Intelligence, warned that the resumption of US airstrikes would increase the risk of Houthi attacks on US and allied warships in the Red Sea and the Gulf of Aden.

He stressed that all commercial vessels transiting the region face great risk due to the unpredictability of the Houthis. Data shows that 63% of the ships attacked had no clear link to the US, UK or Israel. While the US claims to aim to protect freedom of navigation, the Houthis’ decentralized missile capabilities and ambitions to expand their regional influence have complicated the situation, threatening the stability of shipping and the region.

According to a report from investment bank Jefferies, the US airstrikes on the Houthis over the weekend could push up insurance costs in the region and cause ships to steer clear of the route.

In addition, the Trump administration is trying to link the Houthi attacks to Iran, increasing the risk that the maritime crisis in the Red Sea will spill over into other vital shipping lanes.

President Donald Trump has said that any attack by the Houthis would be considered an act of Iranian aggression, and Tehran would be held accountable. Lars Jensen, head of Vespucci Maritime, said the strategy could increase the risk of conflict escalation, especially in the Strait of Hormuz.

Red Sea avoidance is on the rise

Although there have been no Houthi attacks on commercial vessels from Yemen in 2025, shipowners continue to avoid the Red Sea, causing huge losses to Egypt's Suez Canal Authority. In fact, avoidance of the region by the world's two largest shipping groups has increased even more this year.

Data from Jefferies shows:
• Dry bulk vessels avoiding the Red Sea increased by 56% compared to 2023, up from 45% in 2024.
• Crude tankers diverted from 35% to 48%.
• Product tankers also avoided the route more, from 45% to 52%.

Container traffic through the Red Sea has fallen by 90% compared to 2023, in line with the trend in 2024. LNG and LPG tankers have also maintained high avoidance rates, at 80% and 74%, respectively.

According to data from ABG Sundal Collier, the number of vessels calling at the Gulf of Aden ports has fallen by 72% compared to the average in 2023, causing serious losses for the Egyptian economy due to a sharp decline in revenue from the Suez Canal.

No signs of the crisis ending soon

Signs are that the shipping crisis in the Red Sea will not be resolved soon. Last month, the European Union (EU) decided to extend the mandate of the EUNAVFOR Aspides maritime security force for another year. The operation, aimed at protecting freedom of navigation in the Red Sea, will last until 28 February 2026, with a budget of more than EUR 17 million.

Whether the Red Sea route can reopen will be a determining factor in the financial performance of many shipping companies this year. Maersk management recently warned that developments in the region could have a significant impact on profits.

Maersk’s EBIT forecast for 2025 ranges from $0 to $3 billion, depending on whether the Red Sea corridor reopens in the middle or end of the year.

According to Sam Chambers of Asia Shipping Media, the instability in maritime security in the region will continue to have a profound impact on global trade and shipping.

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