Gaza Agreement Revives Hopes for Return of Ships to the Suez Canal

 Suez Canal

Gaza Agreement Revives Hopes for Return of Ships to the Suez Canal

The ceasefire agreement in Gaza has revived hope for a return to normal shipping traffic through the Red Sea and the Suez Canal, after two years of turmoil that inflicted huge losses on global trade and forced shipping companies to reroute away from the vital Egyptian waterway.

Officials and analysts believe that the success of the first phase of US President Donald Trump's Gaza plan, recently approved by Israel and Hamas, could open the door to a broader truce in the Red Sea. This would halt Houthi attacks on commercial vessels and gradually restore shipping activity through the Suez Canal. Analysts expect that transit rates through the canal will begin to gradually increase, returning to normal levels by the beginning of next year if the ceasefire holds and the agreement holds.

Expectations of improved shipping conditions are closely linked to regional security developments, as investors are betting that the resumption of ship transit through the Red Sea will ease pressure on global shipping capacity and curb the price spikes that have prevailed over the past two years. Suez Canal revenues have declined sharply due to this crisis. President Abdel Fattah el-Sisi recently announced that the canal's revenues would fall by 50 to 60% by 2024, equivalent to losses of $7 billion, due to the disruption of shipping in the Red Sea and the Bab el-Mandeb Strait.

A Gradual Return... with a Condition

Wael Kadour, former vice chairman of the Suez Canal Authority, told Sky News Arabia that "the repercussions of the ceasefire in Gaza on the canal will depend on the parties' commitment to the agreement, because any renewed military activity will delay the return of ships to normal operations."

Kadour explained that "the return of shipping through the Suez will not happen overnight, because shipping companies have reorganized their routes over the past two years and modified their supply chains and maritime routes. Therefore, it will take some time to reorganize their routes." He added, "The continued calm and absence of attacks on ships in the Red Sea will lead to a significant improvement in transit traffic. Normal rates are expected to gradually return by early 2026, which could see the full return of shipping lines that previously passed through the canal."

Regarding the Suez Canal Authority's role in restoring shipping lines that have changed their routes, Kadour said, "The authority acts reactively when revenues decline. For example, if revenues fall from $10.2 billion to $4 billion, the authority begins offering discounts of up to 15% to large container ships in an attempt to attract them back. However, this is not sufficient in light of the high insurance costs for ships in an area they consider unsafe." The Suez Canal Authority has extended the 15% reduction in transit fees for container ships with a net tonnage of 130,000 tons or more, whether laden or empty, until the end of 2025.

Potential Positive Impact

Dr. Mohi El-Sayeh, Dean of the Faculty of Maritime Transport at the Arab Academy for Science and Technology, stated that "the ceasefire in Gaza will have a significant economic impact on international trade and the Suez Canal in particular. However, the extent of this positive impact will remain dependent on regional developments, especially in the Red Sea and the Bab el-Mandeb Strait."

El-Sayeh explained that "an improvement in shipping traffic will gradually appear within weeks if the situation in the region, not just Gaza, stabilizes, as shipping companies reschedule their routes and ports after the war ends." This shift is expected to have a positive impact on international trade, given that the canal represents approximately 12% of total global trade and is a major source of hard currency for the Egyptian economy.

Al-Sayeh emphasized that "ending the Gaza war will contribute to improving maritime trade, but it is impossible to be certain that conditions will return to normal in the Suez Canal until the situation in the confrontation between Israel and the Houthis becomes clear. If a ceasefire also leads to a calming of this front, it will have a significant positive impact on shipping in the Red Sea and the Mediterranean, and consequently on the Suez Canal."

The Dean of the College of Maritime Transport pointed out that the positive impact on the Suez Canal will be evident in the short term, particularly in the movement of ships from north to south. Meanwhile, the "southern convoys," i.e., ships coming from the Red Sea, will remain contingent on the stability of the military situation in Yemen and the area surrounding the Bab al-Mandab Strait.