Houthis to halt attacks against most Red Sea shipping

Yemen's Houthi militants announced a major pullout from attacks against shipping in the Red Sea Jan. 20, saying they will now only target vessels with strong links to Israel following the Gaza ceasefire deal between Israel and Hamas.

Ships heading for Israeli ports, even those partially owned by Israeli individuals or entities and managed or operated by them, are exempt from attacks as of Jan. 19, according to a statement from the Houthis.

Attacks on wholly-owned or Israeli-flagged ships in the Red Sea, Bab al-Mandab Strait, the Gulf of Aden, the Arabian Sea and the Indian Ocean will only be stopped once all the phases of the Israel-Hamas ceasefire agreement have been implemented, which are expected to take at least six weeks from their commencement Jan. 19, and possibly years.

Iran-backed Houthis claimed to have attacked more than 1,000 targets including ships linked to Israel, the UK and the US since the Israel-Hamas war broke out in October 2023, but industry participants said many ships without apparent links to the countries were also targeted.

Many ship operators, including BP and Frontline, have avoided the Red Sea in recent quarters to sail around Africa on longer routes, supporting bunker consumption and freight rates. Oil transits via the Bab al-Mandab Strait at the southern end of the Red Sea fell to 2.5 million b/d in 2024 from 6.9 million b/d in 2023, while those via the Suez Canal -- which connects the Red Sea and the Mediterranean -- dropped to 3.9 million b/d from 7.9 million b/d, according to S&P Global Commodities at Sea

Attacks will resume on ships associated with "the aggressor states", however, if there is "event of any aggression against" Yemen, according to the Houthi statement.

Shipping risk

If the Houthi promise is fully implemented, tankers currently taking the longer route via the Cape of Good Hope would return to their normal course via the Suez Canal, saving time and fuel and adding to their supply for loading in the Persian Gulf.

The Red Sea region continues to be categorized as a high-risk area by the Joint War Committee of Lloyd's, which provides guidelines to maritime insurers for setting their respective premium values. LNG ship transit via the Red Sea and through the Suez Canal has been halted for more than a year due to the escalation of attacks on merchant ships.

Chartering sources and brokers based in Singapore, Tokyo and Dubai said they would carefully watch the security situation over the next few weeks before taking a call on actually moving cargoes through the Suez Canal despite the Houthi statement.

However, normal maritime traffic is not expected to resume in the short term, with shipowners taking a wait-and-see approach.

"The environment remains quite fluid and it also very much remains to be seen if this encouraging turn of events will actually result in a change in the regional threat scenario to commercial shipping," one shipping executive said.

"There are too many political and geographical uncertainties that could change the flow of trade," said a chartering executive with a global commodities trading company.

If US sanctions against Russia become more stringent, it could negate or offset the gains charterers might achieve from the ceasefire in the Persian Gulf, the executive said.

A natural gas chartering executive said it was too early to decide on moving tankers through the Suez Canal, as the matter was still under discussion.

Chartering executives in Tokyo and Singapore said the additional war risk premium is expected to decrease but only after several ships pass through the Bab al-Mandab Strait without incident for a few weeks. Charterers will use this as a negotiating tool to reduce the additional war risk premium, a tanker broker in Dubai said.

Cautious approach

Some of the world's largest operators of tankers and dry bulk carriers, like Denmark's Norden and Japan's NYK Line, have recently stated that they would consider resuming Red Sea shipping only after confirming the safety and other conditions in the surrounding sea.

"Shipping companies are not naive; they won't be rushing to change their plans just because there is a temporary ceasefire in Gaza," Elisabeth Braw, a senior fellow at the Atlantic Council, told Energy. "Obviously, it's going to take a lot more than a temporary ceasefire in Gaza for the situation to calm down in the Red Sea."

As a staged ceasefire, it means that if either side violates it at any given point, then "we are back to where we were," Braw added.

A.P. Moller Maersk, CMA CGM and Hapag-Lloyd, the largest container lines globally, have also confirmed they would take a similar approach. "It is still too early to speculate about timing, but these developments are a needed step in the right direction," a Maersk spokesperson said.

Among all shipping sectors, analysts suggested container carriers have managed to hike freight rates most successfully due to the Red Sea diversions and that resumption of normal traffic could lead to a sharp correction of freight rates.

The Platts Container Index, a weighted average of spot rate assessments on key routes, had spiked to $5,272.5/FEU Jan. 3 -- its highest level since the summer of 2022 -- before easing back to $4,011/FEU Jan. 17. Platts is part of Energy.