Red Sea Ceasefire Raises Hopes for Suez Canal Revival, Yet Major Risks Persist

A recent ceasefire by Yemen’s Houthi forces has sparked renewed optimism that commercial shipping could return to the Suez Canal after months of disruption. According to a report from The Loadstar, the pause in attacks is being closely watched by stakeholders in global shipping as a potential turning point for one of the world’s most important trade arteries.

Egypt’s Suez Canal Authority (SCA) has welcomed the development, with Chairman Osama Rabie citing signs of stability returning to the Red Sea. He urged carrier executives to incorporate this improved security outlook into their future routing plans. Meanwhile, the Egyptian government has made public its eagerness to revive traffic through the canal, arguing that recent security shifts provide greater confidence for international shipping.
Despite the positive signals, major carriers remain cautious. Several large shipping lines, including container giants, have not yet committed to a full-scale return. They argue that the ceasefire, while hopeful, remains fragile and insufficient to guarantee long-term safety. According to some analysts, commercial calculations also play a role, the extended detour around the Cape of Good Hope, though costlier in fuel, offers a more predictable risk profile.

A key stumbling block is war-risk insurance. Underwriters are yet to scale back premiums despite the truce – many carriers still face a premium of around 1% of a ship’s hull value for passage via the Red Sea, an unusually high cost that makes insurers reluctant to reduce coverage fees without long-term guarantees. Security experts also warn that while the ceasefire is a welcome break, it may not be durable. Analysts like Lars Jensen of Vespucci Maritime have cautioned that returning to pre-conflict traffic levels requires more than a temporary lull, carriers and insurers will likely adopt a phased approach, carefully managing risk as stability evolves.

For Egypt, the stakes are high. The Suez Canal is a critical revenue source, and the drop in transit traffic since the onset of hostilities has weighed heavily on its economy. However, any large-scale return of container ships will need both security assurances and commercial justification, and for now, most major players are taking a wait-and-watch stance.