With the Israeli military announcing that the Gaza ceasefire agreement has taken effect, investors anticipate the end of the nearly two-year “Red Sea shipping crisis.”
According to CCTV News, on October 10, a spokesperson for the Israeli Defense Forces stated that the Gaza ceasefire agreement has come into effect. The capital market was the first to react, with the stock price of Danish shipping giant Maersk falling by 2%.
Investors expect that with the restoration of safe passage through the Red Sea-Suez Canal, a significant amount of vessel capacity, currently occupied for detours around the Cape of Good Hope in Africa, will be released. This will repair the efficiency of the global supply chain, and the persistently high container freight rates will subsequently fall.
In stark contrast to the capital market’s “front-running,” the insurance industry, as the ultimate bearer of shipping risks, has chosen to “stay put.” The war risk insurance rates applicable to high-risk areas in the Red Sea and the Gulf of Aden remain stable.
Upon the news of the ceasefire agreement, the stock price of Danish shipping giant Maersk fell by 2%.
The capital market anticipates that once the shortest route connecting Asia and Europe—the Red Sea-Suez Canal—resumes safe passage, a large amount of vessel capacity currently used for detours around Africa’s Cape of Good Hope will be released. This will restore the efficiency of the global supply chain, and the stubbornly high container freight rates will subsequently decline.
Since 2023, the Houthi forces have launched hundreds of missile and drone attacks on commercial ships in the Red Sea and the Gulf of Aden, forcing the global shipping industry to bear higher transportation times and fuel costs. Therefore, any signal indicating the normalization of the shipping route is interpreted by the capital market as the end of excess profits for shipping companies.
However, analysts simultaneously warn that this expectation-based trading behavior has not fully transmitted to the actual decision-making level of the shipping industry. Shipping companies might observe for several months before redeploying vessels worth hundreds of millions of dollars and their crews back to this high-risk route, pending confirmation that the threat of attacks has been permanently removed.
Insurance Industry Stays Put: Waiting for Real Risk Clearance
In stark contrast to the capital market’s “front-running,” the insurance industry, as the ultimate bearer of shipping risks, has chosen to “stay put.”
According to market sources, although the ceasefire agreement has taken effect, the war risk insurance rates applicable to high-risk areas in the Red Sea and the Gulf of Aden remain stable.
One source pointed out that insurance companies need to wait for clear evidence that the ceasefire between Israel and Hamas can hold before considering lowering the rates. Until then, they need to prioritize recouping the significant losses suffered due to the Houthi forces’ lethal attacks over the past period.
However, the insurance industry is already preparing for a future easing of the situation. The market expects that Greek tanker owners, who previously avoided this route, will be ready to return as tensions subside. Long-term war risk rates may also fall as new insurance companies prepare to enter the market.
Whether the Red Sea crisis can truly be resolved ultimately rests in the hands of the Yemeni Houthi forces. According to the latest developments, the group has suspended missile and drone attacks on Israel, but its stance is far from an unconditional ceasefire.
According to CCTV News, Houthi leader Abdul-Malik al-Houthi stated in a declaration on Thursday that his organization will maintain the “highest level of caution and preparedness” and will “monitor” the progress of the agreement. He directly set the criteria for testing the agreement’s effectiveness:
“We will remain vigilant, always ready, and conduct comprehensive and precise monitoring during the implementation phase of the truce agreement, following up on whether Israel ends its military operations in the Gaza Strip as agreed, and whether international aid and food can enter the Gaza Strip and be distributed to the Palestinians.”
Abdul-Malik al-Houthi’s statement has been interpreted by the media as indicating that the Houthi forces will suspend military strikes against Israel during the implementation of the ceasefire agreement. However, if the agreement fails to achieve the expected results, the Houthi forces will resume actions.
Disclaimer: This article is reprinted for the purpose of conveying more information. If there are any source attribution errors or infringements of your legitimate rights and interests, please contact us with proof of ownership, and we will promptly correct or delete the content. Thank you.
