Houthi attack on the tanker Sounion in 2024Credit: EU NAVFOR Aspides
An Oman-brokered ceasefire sees the US halting its bombardment of Houthi held Yemen that started on 15 March and the Houthi saying it will stop attacks on shipping in the Red Sea and Bab al-Mandab Strait which started in November 2023, and in recent months have focused on US naval targets.
“This ceasefire is a positive diplomatic development — but we are a long way from declaring a return to safe and stable shipping conditions in the region,” said a spokesperson for Dryad Global.
A key to any major return of shipping that has diverted from the Red Sea and the Suez Canal to would be a removal of war risk ratings by insurers for the region. Although there have been no confirmed attacks on commercial shipping by the Houthi since late 2024 the Joint War Committee in London has not altered its status.
It also far from certain if the truce between the US and the Houthi will hold. The ceasefire between Israel and Hamas earlier this year saw the Houthi drop its action against international shipping and release the crew of the Galaxy Leader held hostage since November 2023. However, when the deal fell apart the Houthi renewed threats against Israeli linked shipping.
Dryad noted Houthi officials have publicly stated that this agreement does not apply to their ongoing campaign against Israel.
Given the uncertainty Dryad assessed that the risk to non-US commercial vessels remains high, particularly those perceived to have links to Israel or its allies.
“This announcement does not yet justify a material change in our regional risk posture,” the spokesperson stated.
The continued assessment of the Red Sea region as a high-risk area is potentially good news financially for shipping companies, in particular container lines, which face severe overcapacity and a sharp drop in rates if they no longer divert vessels via the Cape of Good Hope. Diversions have acted to soak up excess newbuildings over the last 18 months and raised freight rates to the highest levels since the pandemic
Peter Sand, Xeneta Chief Analyst, warned: “Of all the geo-political disruptions impacting ocean container shipping in 2025, conflict in the Red Sea continues to cast the longest shadow, so any meaningful return to the region would have massive consequences.
“Container ships returning to the Red Sea would flood the market with capacity with the inevitable outcome of collapsing freight rates. If we also see a continued slowdown in imports into the US due to tariffs, then the collapse will be even harder and even more dramatic.”
