- A US-Houthi ceasefire announced on May 6 aims to end attacks on US vessels in the Red Sea and Bab al-Mandab Strait, easing pressure on global shipping routes.
- Shipping companies remain cautious, awaiting sustained calm before resuming transits, as the truce currently excludes non-US and Israeli-linked vessels.
- Industry experts view the ceasefire as a limited de-escalation rather than a comprehensive peace agreement, with potential volatility still looming.
On May 6, Oman announced a ceasefire agreement between the United States and Yemen’s Houthi movement, aimed at halting mutual hostilities, including Houthi attacks on US vessels in the Red Sea and its strategic gateway, the Bab al-Mandab Strait. This diplomatic development is expected to promote freedom of navigation and the unimpeded flow of global maritime trade. Oman’s foreign ministry confirmed its role in mediating the truce, which both sides have agreed to uphold, according to S&P Global.
Shipping Industry Response
Despite the announcement, major shipping players have expressed hesitancy. Bimco, a prominent shipping association, advised shipowners to maintain current security measures. Maersk declined to comment pending financial disclosures, while Hapag-Lloyd stated that it is too early to determine any operational changes and will only resume Red Sea navigation once conditions are verified as safe. The US Navy’s Fifth Fleet indicated that shipping companies may require a prolonged period, up to three months, without incidents before considering the region safe again.
Impact of Houthi Attacks on Maritime Trade
Since November 2023, Houthi-led attacks have significantly disrupted Red Sea trade, cutting traffic by approximately 50%, particularly for vessels linked to the US, UK, and Israel. The US escalated military responses in March, conducting over 1,000 airstrikes on Houthi positions. While President Donald Trump declared that the Houthis have agreed to stop targeting ships, skepticism remains high within the maritime community.
Market Stability and Insurance Outlook
Despite the risks, freight markets have remained stable. As of May 7, Platts assessed the cost of transporting a 140,000 mt crude oil cargo from the Persian Gulf to Europe at $22.89/mt, close to the annual average. Similarly, clean product freight rates are steady. Insurance experts such as Munro Anderson from Vessel Protect caution that, although the ceasefire appears formal, uncertainties about its duration and enforcement linger, deterring immediate shifts in insurer assessments.
Limitations of the Truce and Regional Dynamics
The ceasefire is narrowly focused and does not cover Israeli-affiliated vessels, which the Houthis define broadly. Jack Kennedy of S&P Global Market Intelligence emphasized that the ceasefire is a “pragmatic, limited de-escalation,” not a comprehensive resolution. The risk of renewed attacks remains, especially amid ongoing geopolitical tensions. Analysts suggest the US may be aiming to reduce regional tensions ahead of President Trump’s upcoming Saudi Arabia visit and facilitate US-Iran nuclear negotiations, given Iran’s influence over the Houthis.
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Source: S&P Global
