Gaza agreement reached, investors foresee an end to the "Red Sea shipping crisis"

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With the announcement by the Israeli military that the ceasefire agreement in Gaza has taken effect, investors expect that the nearly two-year-long "Red Sea shipping crisis" will come to an end.

According to CCTV News, on October 10, a spokesperson for the Israel Defense Forces said that the Gaza ceasefire agreement had come into effect. The capital markets were the first to react, as shares of Danish shipping giant Maersk fell by 2% in response.

Investors expect that the Red Sea-Suez Canal will resume safe passage, and a large amount of shipping capacity previously tied up for detouring around the Cape of Good Hope in Africa will be released, improving the efficiency of global supply chains, and the persistently high container freight rates will fall as a result.

In sharp contrast to the "head start" of the capital markets, the insurance industry, as the ultimate bearer of shipping risks, has chosen to "wait and see", keeping war risk insurance rates for the Red Sea and Gulf of Aden high-risk areas stable.

Capital Markets Move First: Expectations Realized, Shipping Stocks Decline

As soon as news of the ceasefire agreement broke, the share price of Danish shipping giant Maersk fell by 2%.

The capital markets anticipate that once the shortest route connecting Europe and Asia—the Red Sea-Suez Canal—resumes safe passage, substantial shipping capacity previously occupied for detours around the Cape of Good Hope will be released, supply chain efficiency will be restored, and elevated container freight rates will subside accordingly.

Since 2023, the Houthis have launched hundreds of missile and drone attacks on commercial vessels in the Red Sea and Gulf of Aden, forcing the global shipping industry to bear higher transport time and fuel costs. For this reason, any sign of routes returning to normal is interpreted by capital markets as the end of excess profits for shipping companies.

However, analysts also warn that this expectation-based trading behavior has not yet fully reached the actual decision-making level of the shipping industry. Shipping companies may observe for months before reallocating multi-million-dollar vessels and crews to this high-risk route, until they are certain that the threat of attacks has been permanently removed.

Insurance Industry Waits: Awaiting Real Removal of Risk

In stark contrast with the "head start" of the capital markets, the insurance industry, as the ultimate bearer of maritime risks, has chosen to "wait and see."

According to market insiders, although the ceasefire agreement has taken effect, war insurance rates for the high-risk Red Sea and Gulf of Aden areas remain stable.

One source pointed out that insurance companies require clear evidence that the ceasefire between Israel and Hamas will last before considering lowering rates. Before that, their priority is to recoup significant losses caused by deadly Houthi attacks in the recent period.

However, the insurance industry is already preparing for the possibility of a more peaceful situation in the future. The market expects that, as tensions ease, Greek oil tanker owners who had previously avoided these routes will prepare to return. As new insurers prepare to enter the market, long-term war insurance rates may also fall.

The Houthis’ “Supervision”: Ceasefire Conditions and Uncertainty

Whether the Red Sea crisis can truly be lifted still ultimately rests with the Yemeni Houthis. According to the latest developments, the group has suspended missile and drone attacks on Israel, but their stance is far from an unconditional ceasefire.

According to CCTV News, Houthi leader Abdul-Malik al-Houthi said in a statement on Thursday that his group will remain “at the highest level of caution and vigilance” and will “supervise” the progress of the agreement. He directly stated the criteria for judging the implementation of the agreement:

“We will continue to stay alert and ready at all times, and will carry out comprehensive and precise monitoring during the implementation stage of the ceasefire agreement, observing whether Israel ends its military actions in Gaza as agreed, and whether international aid and food are able to enter Gaza and be distributed to the Palestinian people.”

This statement by Abdul-Malik al-Houthi has been interpreted by the media as meaning that the Houthis will pause military strikes on Israel during the implementation of the ceasefire agreement, but if the agreement does not achieve the expected results, the Houthis will take action again.

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