According to the latest weekly report from shipbroker Gibson, a ceasefire in the Red Sea could significantly impact the product tanker market.
It is understood that earlier this week, the Houthis announced they would suspend attacks on commercial ships, provided the ceasefire holds. However, Gibson emphasized that it remains highly uncertain whether this is sufficient to convince mainstream shipowners and insurance companies that the Red Sea route is safe for navigation. If the Red Sea route is reassessed as safe, it would have profound implications for the global tanker market.
Gibson stated: “The large-scale rerouting around the Cape of Good Hope has had a particularly pronounced impact on clean tanker trade. In 2024, over 90% of clean petroleum product shipments from the Arabian Gulf and India’s west coast to Europe opted for the Cape of Good Hope route. This significantly boosted ton-mile demand and freight rates for clean tankers, with LR2 tankers being the primary beneficiaries.
Later in the year, Very Large Crude Carriers (VLCCs) and Suezmax tankers also began participating in this trade, diverting cargo volumes and leading to a sharp decline in freight rates. Although this trend moderated somewhat thereafter, Suezmax tankers have continued to regularly undertake clean product transportation on this route.
Entering 2025, clean product shipments from East Asia to Europe via the Suez Canal have increased substantially, accounting for an average of about 40% of total volume so far, and the growth momentum is still accelerating.
Gibson added: “This partial resumption of transit has already led to a decrease in ton-mile demand for LR2 tankers. If Red Sea transit fully returns to normal, market demand for LR2 tankers could decrease further.”
LR1 and MR tankers, which previously lost market share to LR2s, are expected to reclaim some of their market. Among them, MR tankers might increase their share on the Middle East to Europe route, particularly for cargoes discharging at Mediterranean ports. However, Gibson warns that this increase could be offset by a corresponding decline in MR volumes on the US Gulf to Europe route.
Meanwhile, in the crude oil shipping sector, the impact is much smaller, as the proportion of global crude exports affected by the Red Sea situation is inherently limited. Since 2025, crude oil shipments via the Suez Canal have also shown an accelerating growth trend, providing demand support for Suezmax tankers. If Red Sea crude trade normalizes, VLCC volumes heading to Europe might decrease, with more crude oil being transported by Suezmax tankers via the Suez Canal. This change could lead to reduced demand for US Gulf crude, putting pressure on Aframax tankers, while freeing up more crude resources for VLCCs to undertake long-haul transportation to East Asia. A significant rebound in crude shipments from the Black /Mediterranean to Asia would also benefit Suezmax tankers.
Overall, the impact of a Red Sea ceasefire on the dirty tanker market is expected to be relatively limited. Suezmax tankers might have some upside potential, but the main downside risk for Aframax tankers is increased competition from LR2 tankers.
Gibson concluded: “The current situation in Gaza remains unstable, and the subsequent actions the Houthis might take are unpredictable. In any case, normalizing trade patterns will take time. Perhaps only with a more solid, long-term peace agreement can Red Sea transit fully return to normal.”
