Shippers unlikely to return to Red Sea route anytime soon despite ceasefire

Despite a ceasefire between the US and Houthis, shipping lines are hesitant to return to the Red Sea route due to security concerns and the limited scope of the agreement.

container-ship-in-Suez-Canal

Container ships transit the Suez Canal

Major shipping lines are likely to be cautious and hold off on resuming operations through the Red Sea, waiting to see whether the ceasefire announced on May 6 will actually end Houthi attacks on ships in the area.

The ceasefire agreement between the US and “relevant parties” in Yemen includes a commitment not to attack each other, including US ships transiting the Red Sea and the Bab al-Mandab Strait off Yemen’s east coast, according to the Oman News Agency on May 6. The agreement is aimed at ensuring “freedom of navigation” and “the unimpeded flow of international commercial shipping.”

“We are still reviewing the various aspects of the reported ceasefire,” said BIMCO, the international shipping association. “As a matter of precaution, shipowners are advised to maintain their current risk management measures until further notice.”

Container shipping line Maersk declined to comment, due to its financial results on May 8. Hapag-Lloyd said it was too early to assess the situation: “We will continue to closely monitor and analyze the latest developments and their impact on the security situation in the Red Sea. Otherwise, the following applies unchanged: we will return to the Red Sea when it is safe to do so.”

Captain Lee Stuart, of the US Navy’s 5th Fleet in Bahrain, said in an interview on April 23 that shipping lines would only consider returning to the Red Sea route after a diplomatic ceasefire and at least three months of no attacks.

According to Stuart, shipping traffic through the Red Sea has dropped to about 50% of what it was before the Houthis began attacking ships linked to the US, UK and Israel in November 2023.

The US has stepped up air strikes against the Houthis since March, with more than 1,000 targets hit in Yemen.

On May 6, US President Donald Trump declared that the Houthis “not be blowing up ships anymore”. “They say they will not be blowing up ships anymore and that’s what the purpose of what we were doing,” he said.

Oman’s foreign minister, Badr al-Busaidi, confirmed that his country had played a mediating role in reaching the ceasefire agreement. “In the future, neither side will target the other, including American vessels, in the Red Sea and Bab al-Mandab Strait, ensuring freedom of navigation and the smooth flow of international commercial shipping,” he said.

However, the impact on shipping markets remains limited for now. Crude oil freight rates are expected to remain stable in 2025. According to Platts, on May 7, the rate for shipping 140,000 tonnes of crude from the Persian Gulf to Europe was $22.89/t, down only slightly from the average of $24.10/t since the beginning of the year. The rate for shipping 40,000 tonnes of clean products on the same route was $50.63/t, close to the average of $51.09/t.

Band coverage limited

Munro Anderson, managing director at Vessel Protect, a marine risk insurer under Pen Underwriting, warned that there are still many unanswered questions regarding the scope and sustainability of the ceasefire.

“Following such a prolonged period of elevated risk within the Red Sea, it is likely that it will take some time for the shipping industry to derive confidence in Houthi statements of peace,” Anderson said. “The conditions surrounding the truce are known to be volatile and liable to change at short notice.”

Jack Kennedy, head of Middle East and North Africa Country Risk at S&P Global Market Intelligence, said the current ceasefire agreement is bilateral between the US and the Houthis and does not include Israel or vessels the Houthis have accused of being involved in the fighting in Gaza.

S&P Global Market Intelligence assesses that it represents a “pragmatic, limited de-escalation rather than a pathway towards comprehensive peace,” and the potential for renewed Houthi attacks on US ships remains high, as well as US counter strikes against Houthi military assets, Kennedy added.

He also noted that the US halt to airstrikes on the Houthis was partly intended to reduce the risk of escalation ahead of President Trump’s planned visit to Saudi Arabia on May 13, while also facilitating nuclear negotiations with Iran, the Houthis’ main backer.

Richard Nephew, program director at the Center on Global Energy Policy at Columbia University, called the agreement covering only US ships “very curious.” It does not guarantee freedom of navigation for any non-US-flagged vessels, especially those that the Houthis consider to be affiliated with Israel — a very broad definition, he stressed.

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