Will Gaza Ceasefire Bring end to Red Sea Shipping Crisis?

The ongoing crisis in the Red Sea has significantly impacted global shipping, forcing vessels to reroute around the southern tip of Africa.
The detour has resulted in an additional 35.7 million tonnes of CO2 being emitted over the past year, according to INVERTO, the supply chain management arm of Boston Consulting Group. The consultancy equates this figure to the yearly emissions of 7.8 million cars – more than three times the total car population of London.
Fewer ships are now passing through the Suez Canal, a critical route linking Asia and Europe. Over the past year, the number of ships using the canal has dropped by approximately 1,000 per month. In September 2023, 2,133 ships transited the canal, compared with only 999 in September 2024. This sharp decline reflects the impact of instability in the region, particularly as many shipping companies seek to avoid the risk of attack from Houthi rebels.
Patrick Lepperhoff, Managing Director at INVERTO and Head of Centre of Excellence SCM & Resilience, states: “The impact on the environment of Red Sea disruption shouldn’t be underestimated. Cargo ships are large emitters of CO2 and this is forcing them to travel thousands of extra miles to reach Europe.”
Increased delays and higher costs
The disruption has not only affected emissions but caused delays in shipping goods from Asia to Europe. Average shipping times on these routes have risen by roughly 30%. This longer transit time has reduced the availability of shipping capacity, exacerbating challenges for businesses reliant on global supply chains.
Companies operating on a 'just-in-time' inventory model are among the hardest hit. These businesses aim to reduce storage costs by receiving goods and components as needed, but the Red Sea crisis has forced many to carry extra inventory as a buffer against potential delays. While this strategy minimises the risk of stock shortages, it ties up financial resources in unused goods, lowering capital efficiency.
“There may be light at the end of the tunnel for businesses that have been affected by the crisis in the Red Sea," continues Patrick. "The ceasefire deal between Israel and Hamas – if it holds – may bring greater stability to the region and allow more shipping to return to the Red Sea through the Suez Canal.
However, even as some stability returns to the region, shipping delays have already had ripple effects on pricing. So far, increases in shipping costs have been modest, but businesses exporting to the US face additional concerns, including the potential imposition of tariffs.
A challenging outlook for supply chains
Patrick explains that extended lead times have created two primary challenges for businesses: delays in operations and the possibility of increased costs.
He adds: “Extended lead times could pose two distinct challenges for businesses: delays and operational issues and an additional increase in costs due to increased shipping rates and tariffs if they are introduced.”
Shipping costs have surged for many companies due to the higher volume of goods being imported into the US. Rising freight rates and the risk of potential tariffs may worsen the financial strain on businesses already dealing with slower shipping times and higher emissions.
“If attacks in the Red Sea continue despite the new development, businesses will have to look to reduce costs as well as cutting emissions elsewhere too,” concludes Patrick. “Hopefully the ceasefire in the Middle East brings peace in the long term. That would bring with it the potential for shipping in the region to return to normal."
The Red Sea crisis has illustrated how geopolitical instability can directly impact global supply chains, leading to increased emissions, higher costs and significant operational disruptions for businesses worldwide.
It has also highlights the urgent need for businesses and governments to collaborate on building more resilient and sustainable supply chains that can adapt to such challenges.
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