By: AGBI

Ships are gradually venturing back through the Red Sea and the Suez Canal, but the vital trade conduit is unlikely to return to full operations in 2026 because the reopening remains fragile, according to experts.

Danish shipping giant Maersk said this month that it returned to the Red Sea and Bab el-Mandeb Strait with one of its vessels for the first time in almost two years, confirming that it would be taking a “stepwise approach towards gradually resuming navigation”.

“The first step is this initial sailing, followed by a limited number of additional trans-Suez sailings. However, there are no planned sailings currently,” the company said in a statement.

France-based container shipping company CMA CGM is to route its Indamex service through the Suez Canal from January.

The French carrier will operate full east-west loops between South Asia and the US East Coast via Suez, cutting transit times by around two weeks compared with the diversion around the Cape of Good Hope.

“We are still some way from a large scale return of container shipping to the Red Sea, but CMA CGM’s announcement of a full east-west loop via Suez is certainly a notable step in the right direction,” Peter Sand, chief analyst at Xeneta, the ocean freight intelligence platform, said.

Houthi militants had been targeting commercial ships since late 2023 in response to the war in Gaza, forcing vessels to avoid the Red Sea and sail around Africa’s Cape of Good Hope. The route can add 10 to 14 days to journeys, inflating costs for fuel, insurance and crew safety.

Ships from countries that the Houthis have deemed not to use Israeli ports – notably from Arab states and China – have been able to transit the Red Sea unharmed and unthreatened.

In July the Iran-aligned group carried out its last major attack, sinking the Eternity C and Magic Seas, both Greek-owned bulk vessels sailing under Liberian flags. In August, Israel killed a number of senior Houthi officials in Sana’a, the northern capital, including the group’s prime minister. Then, in November the Houthis declared a ceasefire after what they described as progress in peace talks between Israel and Hamas.

Just 120 container ships transited the canal in November, a fraction of the 583 recorded in October 2023 before attacks escalated, according to Xeneta data.

“I think there is too much uncertainty to encourage a significant return of shippers to the Red Sea and Suez,” said Justin Alexander, director of Khalij Economics.

Progress towards a second phase of the Gaza ceasefire has stalled, while Israeli operations in the West Bank continue. Alexander warned the Houthis may resume attacks framed as solidarity with Palestinians, or for domestic political reasons as power dynamics shift inside Yemen.

That uncertainty continues to weigh heavily on Egypt, where Suez Canal receipts have historically accounted for more than 5 percent of government revenue.

From a market perspective, a broader return to Suez would also reshape shipping economics. Bimco, an association of international owners, forecasts global ship demand growth of 2.5 to 3.5 percent in 2026 and 2027, roughly matched by fleet supply growth.

A normalisation of Red Sea routings could slash effective demand by as much as 10 percent, as shorter voyages reduce the number of ships required on major lanes.

That poses a problem for an industry already grappling with excess capacity. Spot container freight rates are sliding sharply, with average prices on Far East routes to the US East Coast and northern Europe down more than 50 percent from a year ago. 

“If we see other carriers follow CMA CGM, then capacity will flood the market and we could see freight rates fall hard,” said Sand. “This could push carriers further towards loss-making territory, but they will be fully aware of this outlook and ready to respond.”