Red Sea Container Transits Set for Full Return in Q1 Despite Houthi Risk

Container carriers are transiting the Red Sea again in growing numbers, with estimates that Suez transits will fully recover during Q1 of the coming year — even as Houthi-Saudi violence intensifies and the risk of attacks on vessels near Bab el-Mandeb rises.

That's the paradox at the center of this week's Freightos update from Judah Levine, Head of Research at Freightos Group. More Iranian attacks around the Strait of Hormuz, yet more tankers passing through. More crude exports, yet oil still hovering around $100 per barrel. More Houthi advances along the Red Sea, yet more boxships sailing straight through it.

What's happening on the water?

Iran has stepped up attacks on vessels around the Strait of Hormuz, partly a reaction to increased transits and crude flows through the waterway in recent weeks. Last week an Iranian projectile sank a Dubai-linked container vessel. Some container ships are clearly willing to run the strait, though tankers still make up most of the traffic.

Middle East crude exports are approaching pre-war levels, according to some estimates. But crude prices, still pricing in elevated risk, remain high.

Meanwhile, Houthi forces have made recent advances along the Red Sea, increasing their potential leverage over traffic through the Bab el-Mandeb Strait and the likelihood of attacks on passing ships. Since late 2023, that level of risk was enough to divert the vast majority of container traffic away from the Red Sea. Not anymore.

Why are carriers going back now?

Why carriers feel more comfortable returning now than during earlier high-risk stretches is the practical question. The answer is probably a mix of high fuel costs, current congestion levels, and shifting geopolitics. As Peter Tirschwell recently pointed out, the Houthis may have an interest in security and stability for most Red Sea traffic — something that could lend the group a degree of legitimacy with the West — alongside increased pressure aimed at Saudi Arabia and its vessels.

The gradual pace of the rebound matters commercially. Because carriers are coming back in steps rather than all at once, schedule disruptions and vessel bunching should stay contained as more ships arrive ahead of their slots. The restoration also began after the early-July Asia–Europe demand peak and will run through the coming low-demand months, meaning far less pain for shippers than a peak-season return would have caused.

Port congestion, though backlogs are finally easing at Far East hubs, continues to absorb some capacity. That will help carriers defend rate levels even as effective capacity grows from vessels circulating faster via the Red Sea. Longer term, though, a completed Red Sea return — if geopolitics allow it — increases overcapacity risk for carriers in 2027.

Where are rates now?

• Asia–N. Europe: Freightos Baltic Index rates climbed 6% last week to $3,442/FEU, on GRIs aimed at pressuring rates as 2027 long-term contract negotiations get underway. Some forwarders doubt the increases will stick given current market conditions.
• Asia–Mediterranean: up 3% to $3,927/FEU.
• Transpacific: stable but elevated — $8,126/FEU to the West Coast, up 1% to $9,700/FEU to the East Coast. Daily rates this week show signs of increase, despite cooling volume expectations, possibly due to capacity reductions as the lanes enter slow season.
• Transatlantic: carriers announced significant October price hikes last month, but spot rates have risen only about $200/FEU since end-September, to $2,850/FEU. That's still 25% higher than a year ago, likely reflecting upward pressure from elevated bunker costs.

The Asia–Europe spot uptick comes after months of declines and against slumping demand on the trade — a reminder that GRIs and congestion, not volume, are doing the work right now.

Air cargo: new EU fee lands November 1

The EU will introduce a €2 small parcel handling fee on November 1, stacking on top of the €3 customs surcharge introduced in July for low-value imports that previously entered under the de minimis exemption. The added fee could deepen the China–Europe e-commerce volume drawdown seen since July, which has already pressured air cargo rates down and pushed freighter capacity onto other lanes.

Freightos Air Index data show ex-China rates jumped last week — possibly a post-Golden Week backlog rebound or the start of peak season pressure. Prices surged 19% to $6.88/kg to the US and climbed 8% to $3.87/kg to Europe.

The global air benchmark sits 30% above last year on elevated fuel costs and volume growth, with transpacific rates up 25% year on year. Asia–Europe prices, though, are down 3% versus last October — likely the e-commerce adjustment at work on that lane.

Watch Q1: if transits through Suez keep climbing on this trajectory while Asia–Europe GRIs hold into contract talks, the 2027 overcapacity question moves from theoretical to priced in.