Why are shipping companies avoiding Red Sea trade route despite Gaza ceasefire?

The leader of Yemen’s Houthis, Abdul Malik al-Houthi, has said his group will monitor the implementation of a ceasefire deal between Israel and Hamas and will continue its attacks on ships in the Red Sea if it is breached.

The six-week phase one of the ceasefire agreement between Israel and Hamas comes into effect on Sunday.

In support of Hamas, the Houthis from Yemen initiated a campaign against merchant ships passing through the Red Sea and the Gulf of Aden, targeting more than 100 ships since November 2023, leading to a major rerouting for most ships heading between Asia and Europe. The Houthis have repeatedly stated their campaign will continue until Israeli forces leave Gaza.

Speaking with Splash earlier this week, Guy Platten, the secretary-general of the International Chamber of Shipping, stressed that the seafarers from the Galaxy Leader are not forgotten and are released as part of any sustained ceasefire deal. The Galaxy Leader, a car carrier, and its crew were hijacked by the Houthis 14 months ago.

There have been no confirmed ship strikes by the Houthis in 2025 so far, with the militant group focusing its attacks on Israel directly with drones and missiles. Houthi military installations have come in for increased aerial attacks in recent weeks from Israeli, US, and UK planes.

The Red Sea, a vital artery for global trade, remains eerily quiet. Shipping companies continue to bypass the route despite the recent ceasefire between Israel and Hamas.

In recent times, the Iran-aligned Houthi militia has carried out over 100 attacks on ships since November 2023, claiming it’s in solidarity with Palestinians in Gaza.

But why are vessels transporting goods across the world still avoiding the Red Sea trade route now that the fighting in Gaza is poised to be paused?

The decision has to do with lingering fears of Houthi attacks.

Although the group has signalled that it may halt attacks if the ceasefire holds, scepticism runs deep among industry leaders.

The European Union’s naval force in the region has maintained its high threat assessment, further reinforcing the reluctance to resume Red Sea operations.

Shipping and insurance executives say the risks of navigating the Bab al-Mandab strait– which connects the Red Sea to the Guld of Aden– remain prohibitively high.

The uncertainty has pushed companies to reroute shipments around the Cape of Good Hope, adding significant time and cost.

Higher war risk insurance premiums for vessels still brave enough to transit the Red Sea further deter shipping.

Premiums range from 0.6 per cent to 2 per cent of a vessel’s value, especially for ships linked to Israel or the United States.

Matt Castle of logistics group C.H. Robinson noted that cargo insurance challenges and time constraints make a rapid return to the Red Sea unlikely.

For larger vessels like liquefied natural gas carriers, resumption of operations will take even longer due to heightened safety concerns.

What industry says?

Jay Foreman, CEO of US-based Basic Fun, which supplies toys to major retailers like Walmart and Amazon, is among those steering clear.

“There is no way I’m putting any of my merchandise on a boat that’s going to go through the Red Sea for some time,” he said. “I’ll spend the extra money, and I’ll send everything around the tip of Africa… It’s just not worth taking a chance.”

The caution is echoed across industries.

Norwegian shipper Wallenius Wilhelmsen, which transports vehicles, said it would not resume Red Sea operations “until it is safe.” Similarly, Swedish fashion giant H&M and Tailwind Shipping Lines continue to monitor the situation without committing to the route.

Maritime security sources have warned that any pledge by the Houthis to cease attacks will be met with scepticism. “It’ll definitely be a case of trialing the route, making sure that the ceasefire is genuine,” said Craig Poole, managing director at Cardinal Global Logistics.

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