Red Sea Trade Route Collapse Following US-Israel Strikes on Iran - 2026

On February 28, 2026, the maritime security environment across the Red Sea and Bab el-Mandeb Strait deteriorated sharply following the launch of joint US-Israeli military strikes against Iran. Within hours, Yemen's Houthi movement announced its intention to resume missile and drone operations against commercial shipping in the Red Sea and Gulf of Aden, ending a period of relative calm that had lasted approximately three and a half months since the Gaza ceasefire of October 2025. The EU naval mission EUNAVFOR ASPIDES immediately issued a high-alert warning to the shipping industry, stating that attacks against all merchant vessels could not be excluded.

The escalation reversed what had been a cautious but promising return of container shipping to the Suez Canal corridor. In the weeks leading up to the conflict, several major carriers had begun testing or partially restoring services through the Red Sea. Maersk had announced in January 2026 that its MECL service connecting the Middle East and India to the US East Coast would resume transiting via the Suez Canal. CMA CGM had also reintroduced selected services through the waterway. These efforts represented the first meaningful steps toward normalizing east-west trade routes since Houthi attacks forced a mass exodus of container shipping from the region in late 2023.

All four of the world's largest container shipping lines responded within 48 hours of the strikes by suspending Red Sea operations. Maersk paused all Trans-Suez sailings through the Bab el-Mandeb Strait, rerouting its ME11 and MECL services around the Cape of Good Hope. Hapag-Lloyd followed with an identical decision, diverting its IMX service to the longer African route. CMA CGM suspended all Suez Canal passages and instructed vessels bound for the region to proceed to shelter, while MSC ordered all vessels operating in or near the conflict zone to move to designated safe areas and suspended all Middle East bookings until further notice.

The rerouting of container traffic via the Cape of Good Hope adds approximately 3,500 nautical miles and 10 to 14 additional days to typical Asia-to-Europe voyages. This detour increases fuel consumption by an estimated 30 to 35 percent per voyage and ties up vessel capacity for significantly longer periods. According to industry data, Cape of Good Hope diversions were already absorbing around 2.5 million TEU of global container shipping capacity before this latest escalation, effectively reducing the available fleet and tightening supply on major east-west trade lanes.

Carriers moved quickly to introduce emergency surcharges to offset the increased operational costs. Hapag-Lloyd imposed a War Risk Surcharge of 1,500 USD per TEU for standard cargo and 3,500 USD per container for refrigerated and specialty shipments, effective March 2, 2026. CMA CGM announced an Emergency Conflict Surcharge of 2,000 USD per 20-foot container, 3,000 USD per 40-foot container, and 4,000 USD per reefer unit, applicable to all cargo destined for Red Sea ports in Saudi Arabia, Egypt, Jordan, Djibouti, Sudan, and Eritrea. These charges came on top of existing Transit Disruption Surcharges and Peak Season Surcharges that had remained in effect since the original Red Sea crisis began in late 2023.

The renewed disruption has significant implications for global freight rates and supply chain costs. According to Xeneta, average spot rates from China to North Europe and the Mediterranean remained elevated by 48 percent and 79 percent respectively compared to pre-crisis levels as of early March 2026. While rates from China to the US had softened by 32 to 35 percent since the start of the year, analysts now expect the downward trend to stabilize rather than continue, as fewer services than anticipated will resume Suez Canal transits in the foreseeable future. The additional shipping costs associated with the Cape route are estimated at 200 to 400 USD per TEU, factoring in fuel, crew wages, and vessel positioning expenses.

War risk insurance premiums represent another major cost factor. During the previous Houthi campaign, premiums for Red Sea transits surged from typical rates of 10,000 to 20,000 USD per voyage to between 150,000 and 500,000 USD. The Baltic and International Maritime Council (BIMCO) warned that insurance rates were expected to increase substantially once again, with vessels linked to US or Israeli interests potentially unable to obtain coverage at all for Red Sea transits. Industry-wide hull and machinery insurance had already risen by 15 to 25 percent as a baseline due to the prolonged regional instability.

The impact on the Suez Canal and the Egyptian economy has been severe. Canal revenues collapsed from a record 10.25 billion USD in 2023 to just 3.99 billion USD in 2024, a decline of 61 percent, as the number of transiting vessels fell from 26,400 to approximately 13,200. Early signs of recovery in late 2025 and early 2026, with modest increases in traffic and revenue, have now been undermined by the renewed security crisis. The IMF had projected canal revenues would remain depressed at around 3.6 billion USD for fiscal year 2024-2025, and the latest escalation makes any near-term recovery increasingly unlikely.

Logistics experts have warned of cascading effects on global supply chains. The extended transit times disrupt just-in-time manufacturing models, particularly in the automotive, electronics, and e-commerce sectors. Container shortages are expected to worsen as vessels take longer to complete round-trip voyages, further tightening global capacity. Several European auto plants had already experienced temporary production shutdowns during the earlier phase of the Red Sea crisis due to delayed parts shipments from Asia.

Port congestion is another growing concern. Analysts from Vespucci Maritime predicted that cargo originally destined for Persian Gulf ports would be discharged at alternative transshipment hubs such as Salalah, Khor Fakkan, Sohar, and Colombo, creating bottleneck effects that could spread to major Asian transshipment ports including Singapore, Tanjung Pelepas, and Port Klang. The resulting congestion risks compounding delays across interconnected shipping networks.

The outlook for a return to Red Sea shipping in 2026 has been effectively eliminated by this escalation. Xeneta Chief Analyst Peter Sand stated that the military operations and subsequent retaliatory actions would lead to further weaponization of trade and destroy any remaining hopes for a large-scale resumption of container shipping through the Suez Canal this year. The EU extended the mandate of its EUNAVFOR ASPIDES naval mission to February 2027, while US maritime authorities maintained their advisory urging vessels to avoid the broader region. As of early March 2026, no confirmed new Houthi maritime strikes had been independently verified, but all major carriers and naval operators had elevated threat levels and activated contingency protocols in anticipation of renewed hostilities.