Red Sea Shipping Returns, but Recovery Is Far From Certain

The global shipping industry is slowly returning to the Red Sea route after more than two years of disruption. Some sailings through the corridor have resumed, including by major carriers such as Maersk, signalling growing confidence that security risks are easing. The economic effects of this reopening remain complex and far from uniform.

Global trade depends heavily on the Red Sea route. Around 12 to 15 per cent of global trade by volume passes through the Suez Canal, meaning it remains one of the world’s most important maritime chokepoints. Journeys between Asia and Europe extended by approximately 10 to 14 days when vessels diverted around the Cape of Good Hope in late 2023. The increased fuel consumption and reduced effective shipping capacity therefore pushed up freight rates and contributed to global supply chain delays.

Traffic through the Suez Canal fell sharply during the height of the disruption. Egyptian authorities reported significant losses in revenue as transits fell, highlighting how geopolitical instability can quickly affect national income and global supply chains. At the same time, container freight rates surged. Data from shipping analysts such as Xeneta showed that spot rates on major Asia to Europe routes increased by more than double at points during the crisis

compared with pre-disruption levels.

Some of those changes are now being reversed by the partial reopening. Shorter routes mean lower fuel consumption and quicker turnaround times for vessels. As capacity returns to the market, freight rates have come under pressure. Spot rates from Asia to Northern Europe and the US West Coast have eased significantly compared with their peak levels, reflecting improving route access and softer global demand. For importers and retailers, this could reduce transport costs and help ease the pressure of goods’ prices.

The situation remains fragile. Maritime security incidents continue to occur in waters around the Gulf of Aden and the Red Sea. Even when attacks are not carried out, the perception of risk remains important. Insurance premiums therefore stay elevated compared with pre-crisis standards, increasing the overall cost of transit. Some carriers continue to weigh up the savings

from the shorter route against potential risks.

A broader structural issue also shapes the outlook. Global container fleet capacity has expanded in recent years as new vessels ordered during the pandemic shipping boom have entered service. If Red Sea traffic normalises while demand remains moderate, the industry could face excess capacity. This would place further downward pressure on freight rates and shipping company earnings in 2026.

In economic terms, the reopening of the Red Sea corridor produces both positive and negative effects. For global trade and inflation, lower transport costs are beneficial. However, for shipping companies, the return of capacity and weaker rates may tighten margins. The true outcome depends heavily on whether security conditions stabilise sustainably. Until then, the Red Sea’s

role in global trade remains partially restored but still uncertain in substance.