Suez Canal Shipping 2026: Risks, Carrier Strategies & Impact On Ports

An unexpected consequence of the Israel-Hamas conflict was the disruption of commercial shipping in the Red Sea region. 

As the conflict intensified, the Houthis in Yemen launched missile attacks on vessels in the Red Sea. Given their strategic location at the crossroads of major East-West shipping routes, the Houthis were successful in severely impeding maritime trade on this route.

The attacks, which started in mid-December 2023, continued despite airstrikes on launch pads and Houthi strongholds, with the intensity only waning towards the second half of 2025. 

During this period, Carriers were compelled to reroute vessels via the Cape of Good Hope (CoGH) to avoid the conflict zone and minimise potential risks to crew, vessels, and cargo. 

From the perspective of Carriers, while the CoGH routing helped maintain equilibrium between supply and demand and thus kept rates from falling due to oversupply of capacity, it considerably increased sailing times. With additional capacity being absorbed as more vessels were introduced on FEA-EUR services (to maintain weekly services despite longer sailing times), the pressure on freight rates eased somewhat. 

Impact on Countries and Ports: Regional and Trade-level

The impact of the altered trade routing was felt by several countries. 

1) Egypt

It was directly affected, as the closure of the Red Sea route meant a drop in vessels using the Suez Canal. The Suez Canal is a major source of government revenue and generator of foreign currency for the Egyptian government, with revenues touching $10 billion in 2023.

While the diversified and broad-based nature of the Egyptian economy means that it is not excessively reliant on revenues from the Suez Canal, it nonetheless witnessed a significant erosion in revenues and forex earnings, with the UNCTAD having estimated a 40% drop in revenue. 

Egypt has also recently reached out to Iran, hoping for a rapprochement that might be useful in getting Iran to control the Houthis (as Iran supports the Houthis militarily and ideologically). While a formal agreement has not been reached, statements have been made regarding the importance of ensuring smooth trade and safe passage of vessels in the Red Sea region (and by extension, ships sailing through the Suez Canal).

2) East African countries

For East African countries, Europe is a major trading partner, with European trade flowing through the Suez Canal. The closure of the Canal meant a decline in European trade, which in the short term would be difficult to replace with other trade partners (due to commodity mix and existing trade policies).

3) Southern and West African Ports

They saw a surge in vessel calls, as most vessels sailing via the CoGH now call at ports en route (i.e ports in South and West Africa). 

South African ports, however, were unable to fully capitalise on this development, hindered as they were by systemic infrastructural challenges, while West African ports faced congestion, cargo handling delays and vessel backlogs.

4) Middle Eastern countries

Transhipment ports, especially, have been affected in the Middle East. While ports handling domestic cargo would likely continue handling the cargo, unless the cargo is diverted to other ports or transported via other modes (unlikely given that the sheer capacity of maritime transport means other rail and road modes cannot transport cargo at the same scale, and thus cannot be considered viable options, and are at best only a short-term alternative), ports such as Salalah, which handle considerable transshipment volumes, reported declines directly attributable to the conflict (Salalah saw a 16% decline in container volumes in the first half of 2024).  

5) Far East / South East Asian countries

Volumes from these countries did not decrease, as cargo continued to be shipped, albeit through the CoGH. Asian manufacturers and exporters, however, had to contend with extended transit times, necessitating appropriate reconfiguration of supply chains/ planning thereof. 

6) European countries

As with Asian countries, European countries and importers therein had to contend with the altered routing and consequent longer sailing times, having to adjust inventory stocks accordingly, increasing need for warehousing space and working capital (tied up in inventory). 

Ports in some countries benefited, as was the case with Spanish ports like Barcelona, which saw volumes increasing by 6.0% in 2024, as they are now the first port of call in Europe.

Developments By 2025 End & Outlook for 2026

With the Israel-Hamas peace deal having led to a cessation of hostilities, and the Houthis consequently pausing their attacks on commercial shipping vessels plying the Red Sea, there was anticipation about an imminent return to the Suez Canal route.

If and when carriers start using the Suez Canal route, sailing distances and times would reduce significantly. The route could then be served by fewer vessels, releasing into the market the excess tonnage that had been injected to account for the higher transit times, which in turn could pressurise freight rates and erode profit margins of carriers.

Over the past months, carriers have given mixed signals about a possible return to the Suez Canal. While most global carriers have expressed cautious optimism about a gradual return, the actual decision to do so would depend heavily on the ground situation. 

Maersk Line, traditionally amongst the most risk-averse and conservative carriers, and which was amongst the first carriers to use the CoGH routing at the start of the crisis, is today notably more sanguine about using the Suez Canal route. On the other hand, CMA-CGM, which was more amenable to using the Suez Canal route at the start of the crisis, is now adopting a more circumspect approach.

It is to be noted that since carriers operate in alliances, especially on major East-West trade lanes, such a decision would have to be taken in consultation with Alliance partners, rather than solely resting on individual Carriers. 

Also, as Carriers are more sensitive to potential risks rather than the occurrence of the actual event itself, as long as there continue even sporadic attacks on commercial vessels, Carriers would be reluctant to use the Suez Canal, regardless of the number, scale and success of such attacks. 

Routing decisions would therefore be contingent on the risk appetite and threat assessment of Alliance members, who collectively would likely adopt a policy of phased return to the Suez Canal, whereunder a limited number of services are initially rerouted and future decisions taken based on subsequent developments and continued peaceful passage of vessels. 

Likely Scenario in 2026

Considering how tenuous the overall situation is, a return to normalcy is by no means a given. Any fresh conflagration between Israel and Hamas could give the Houthis a reason to renew their attacks. 

The outbreak of hostilities, even at a limited scale, between the US and Iran could also deter Carriers from using the Red Sea route/ Suez Canal.

As long as there remains even the slightest of threat to vessels, Carriers would continue to be reluctant to move away from the existing CoGH routing, preferring to adopt a cautious stance and avoid any course of action that could in hindsight prove to be precipitate. 

We could see a situation where Carriers first re-route independent services via the Suez Canal, before evaluating a full-fledged Alliance-level return.

A possible option is the use of the Suez Canal on the head-haul leg, while retaining the CoGH routing for the back-haul (this has been tried earlier as well, to reduce bunker costs).

Ports and Shippers: Implications and Strategic Responses

Ports

This serves as yet another reminder for the African ports sector to invest in infrastructure upgrades and improve productivity and efficiency levels. 

Should carriers ultimately decide to retain the CoGH route for at least some services, ports which can handle mega-vessels, by having invested in dredging (to deepen draught), infrastructure and equipment (to accommodate larger vessels), and capacity expansion (to handle higher cargo volumes), will be better positioned vis-à-vis their regional competitors to induce these services.

Even disregarding the rerouted calls from Red Sea disturbances, it will help African ports cater to anticipated cargo growth, underpinned by rapid economic progress and demographic dividend.  

Exporters and Importers

They mostly do not have a say in routing decisions, as this is primarily based on the carriers’ perception of risk, wherefore their mitigation strategies would be aimed at increasing supply chain resilience. 

This can be done through higher inventory levels, looking at alternate suppliers, and exploring other transport modes such as the rail mode between China and Europe (to ensure at least limited cargo movement in times of contingencies, even though rail cannot match the scale of maritime transport). 

Conclusion

In conclusion, it has to be pointed out that, notwithstanding the difficulties in hazarding a conjecture regarding timelines for a return to the Red Sea route, the current situation is more in the nature of a short-to-medium term disruption rather than indicative of a structural change. 

As and when military pressures ebb and risk levels subside, Carriers will be increasingly open to using the Suez Canal.

Given the obvious benefits of the Suez Canal route (shorter sailing distances, faster transit times, higher turnover, and asset utilisation), it will remain the preferred route, though some services/ legs might continue to be routed via the CoGH (as a form of supply chain or network diversification).

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