Insight Focus
Maritime instability worsens in the Middle East. Container shipping shows resilience via Cape of Good Hope reroutes, but key hubs like Jebel Ali, Salalah and Hamad remain largely cut off, and Red Sea traffic is unlikely to recover soon. Rising oil prices and higher operating costs could push freight rates up 10–20%, though the sector is better prepared than during previous crises.
The US–Israeli war on Iran has created global instability across almost every business sector. Unsurprisingly, its effects on the shipping industry are also significant, adding further pressure to an already fragile maritime environment in the Middle East. The Red Sea and the Suez Canal have remained highly risky areas for the third consecutive year, with the vast majority of shipping companies avoiding the route due to safety and security concerns.
While the container shipping sector has not been affected to the extent one might expect, there are still several important developments and implications that need to be noted and carefully considered.
With most ocean carriers having already developed service networks that avoid the Middle East, it has been relatively easier for them to make the necessary adjustments to steer away from the Strait of Hormuz and the Bab el-Mandeb Strait, which are now considered highly restricted zones.
This has helped keep global containerised freight rates relatively stable, but the situation is unlikely to remain sustainable indefinitely.
Port Congestion Rises Again
Around 800,000 containers per month that previously moved into the Middle East region are now affected by the crisis. As these goods still need to reach their final destinations, every additional week that these critical maritime arteries remain effectively closed increases pressure on the container shipping industry.
Port congestion has once again become one of the sector’s major challenges. The effects are spreading across global ocean supply chains, extending far beyond the epicentre of the conflict in the Middle East, particularly to major Asian transshipment hubs. This has clear implications for shippers relying on services calling at these hubs, even if their cargo never passes through a Middle Eastern port.
According to data from Xeneta, congestion at Malaysia’s Port Klang has reached 50% and has remained elevated throughout the crisis. The other major port in the country, Port of Tanjung Pelepas, stands at 37%, Port of Singapore has climbed back to 36% after a brief improvement, and Sri Lanka’s Port of Colombo is at 46%.
Port of Singapore
“These port congestion numbers are volatile and shifting daily as carriers, freight forwarders and shippers all work to protect their interests during yet another supply chain crisis. Monitoring congestion and schedules once a week is simply not enough during a crisis of this nature,” commented Peter Sand, Chief Analyst at Xeneta.
To understand the potential scale of disruption to global supply chains, it is useful to look at several key hubs in the region. The Port of Jebel Ali, the largest between the mega container hubs of Singapore and Rotterdam, handles around 14 million containers per year and serves as the primary transshipment hub for the wider Gulf region. Meanwhile, Oman’s Port of Salalah and Qatar’s Hamad Port also function as important, albeit smaller, transshipment hubs.
With the Strait of Hormuz effectively closed, these hubs are largely cut off from their trade networks. Vessels are unable to reach them, while cargo already inside the region cannot easily depart.
“All up, a little over 3% of global containerized freight transits the Strait annually, well below the 20% share of global energy trade, but still an important cog in supply chains,” noted a Middle East trade report from Oxford Economics.
Hopes of a Red Sea Route Recovery Collapse
The new conflicts in the Middle East have emerged at a time when the region had begun to regain some of the shipping traffic lost in previous years. Many major ocean carriers had recently begun cautiously returning to the Red Sea and the Suez Canal, gradually sending more vessels through the corridor and reintroducing it into some service networks.
However, the war between the US, Israel and Iran has effectively eliminated any near-term hopes for a full return to this route, as the Middle East has once again become a focal point of geopolitical tensions. The entry of the Houthis into the conflict delivered the final blow to those expectations.
Houthi Lesson Shows Shipping Resilience
It is important to note, however, that because carriers had already been routing vessels around the Cape of Good Hope, the global freight system has entered this new phase of disruption with greater resilience than in 2023. At that time, when Houthi attacks first began targeting vessels in the region, the shock caught the industry largely unprepared.
“Routes had to be renegotiated overnight, and schedules rebuilt from scratch. On top of that, vessel demand surged as ships suddenly needed to cover far greater distances to complete the same journeys. All that pushed freight costs higher,” explains the report from Oxford Economics.
Today, container vessels are already deployed on longer routes, carriers’ schedules have been rebuilt around the Cape of Good Hope over the past two years, and the industry is no longer scrambling to adapt as it was during the initial crisis.
As a result, global containerised freight rates have remained remarkably subdued since the onset of the conflict, particularly when compared with the sharp increases observed during the Red Sea crisis of 2023–2024 and the 2025 Israel–Iran tensions, according to Oxford Economics data.
Source: Drewry
Outlook for Freight Costs
This relative stability is unlikely to last forever. With oil prices skyrocketing, the cost of operating vessels is inevitably increasing. In normal conditions, bunker fuel accounts for around 30–40% of total vessel operating costs, meaning that a sustained 50% increase in oil prices — as seen in recent days — could mechanically push freight costs up by 15–20%.
Source: USDA
This estimate does not yet include the additional war-risk insurance premiums or the extra steaming time required for longer routes via Africa. Even so, the outlook for the container shipping sector remains considerably more optimistic compared with other shipping and maritime segments.
Analysis by Oxford Economics suggests that shipping lines now have the capacity, operational schedules and institutional experience to rely further on routes around the Cape of Good Hope, helping to minimise disruption. Ocean carriers have become completely familiar with avoiding the Middle East, so they will continue to do the same.
Given this, the primary transmission channel from the conflict to container shipping costs is likely to be oil prices feeding into bunker fuel costs. Considering the sharp rise in oil prices in recent days, a 10–15% increase in containerised freight rates over the coming months appears feasible.
While such an increase might even be seen as somewhat “welcome” by some shipping stakeholders, given that a full-scale war could cause far greater disruption, it nevertheless represents another blow to an already fragile industry — an industry that, in recent years, has been attempting to return to normal operations amid persistently abnormal global conditions.
