Silence at Red Sea - How the Houthi attack Pause Could Disrupt Global Shipping

Recently Houthis have published a letter to Hamas Qassam Brigade and announced a pause on attack on ships at Bab-el-Mandeb Strait passing through Red sea. The letter was from Major General Yusuf Hassan Al Madnani who holds the rank of Military Chief of Staff of the Houthis.

The attacks started in Nov 2023 after the Israel-Hamas war started on October 2023, this led to closure of Red Sea passage, diverting of ships through Cape of Good Hope and soaring on Ocean Freight and this impacted the Global GDP by 1 to 2 %.

There were several occasions when it was expected that the attack would stop but it actually did not happen but this time since the attackers have announced the pause, it seems to be happening.

Impact on Freight

• The pause as announced is temporary but not permanent thus it will not have a quick impact on Ocean Freight.

• Presently the shipping lines are not sure to divert the vessels back to Suez canal routing.

• The insurance premium for passing through Red sea is still high and no reduction is seen after this news.

• The Drewry World Container Index has already fell by 5% to USD 1859 / 40’ container by this week. The index was at USD 3986 /40’ on 9th Jan 2025 and it was USD 1859 /40’ on 13th Nov 2025. The fall is continuous and will be seen further.

What if the Houthi attack pause becomes permanent?

• The Ocean Freight will come down by 25% to 50%.

• Shipping lines will go through cut throat competition as was seen in 2008 and 2018 when the competition became so high that few shipping lines like Hanjin went bankrupt with sudden news and less shipping lines were left behind. Since last 2 years the ships capacity has increased drastically as many shipping lines have utilized the profits to buy new ships , presently many vessels are utilized through the longer route through Cape of Good Hope but in case the Suez canal route is opened then the capacity will shrink by 5 to 10% which will lead further to competition.

• The oil market will see an impact as their would be pressure on bunker charges as if Suez route opens then there would be a reduction on free premium on oil prices, and Oil companies may see increase in oil price volatility.

  Increase in stock piles as the usage of oil will be reduced by shipping industry by 5 to 10% due to decrease in the route.

Supply Chain disruption

Globally since last two years, the maritime industry, exporters, importers and shipping lines have adjusted themselves to the longer route of Cape of Good Hope and a change in this route will take a hit on change of vessel route, vessel rotation, port berthing window renegotiation, container inventory planning and a lot more things. This will lead to a sudden chaotic situation.

Later in case of any escalation in the attack, the re change of the shipping routes will cost more impact and loss.

Lets track the situation, will keep you updated.