Shares of Europe’s major shipping companies experienced a significant decline on Monday following a report regarding an agreement between carriers and Yemen’s Houthi. This agreement aims to prevent the Iran-backed militia from attacking vessels in the Red Sea.
Hapag-Lloyd and A.P. Moeller-Maersk had witnessed remarkable growth in their stock prices over the past month. According to Dow Jones data, Hapag-Lloyd’s stock had risen approximately 50%, while A.P. Moeller-Maersk’s had increased by around 30%. This surge in stock prices was attributed to carriers perceiving the Red Sea and the Suez Canal as unsafe, leading to a doubling of shipping rates between Asia and Europe within the same period.
The Houthi have been aggressively targeting shipping in the region by employing drones, missiles, helicopters, and boats. Their actions are in response to Israel’s invasion of Gaza, which followed the Hamas attack on October 7th.
However, recent reports by Shippingwatch suggest that carriers are now entering agreements with the Houthi to avoid further attacks. This development has the potential to reduce tensions, encourage shipping groups to resume transit through the Red Sea, and ultimately alleviate the surge in shipping rates between Asia and Europe.
As a consequence of these developments, shares of Hapag-Lloyd fell by 7% on Monday, while A.P. Moeller-Maersk experienced a loss of 4.3% in their stock value.
It is worth noting that both stocks initially experienced even greater declines before partially recovering once Shippingwatch clarified that the “largest container carriers” had not entered any agreements with the Houthis to avoid attacks. Both Hapag-Lloyd and Maersk denied having reached any such pact, as reported by Bloomberg.
As tensions persist, the number of ships passing through the Suez Canal reached its lowest level over the past weekend. This low figure hasn’t been observed since the waterway was blocked by the Ever Given container ship in 2021.
At the same time, market observers are closely monitoring the situation to assess whether longer voyages, which involve sailing around South Africa’s Cape of Good Hope, and the subsequent increase in shipping rates will once again lead to supply-disruption inflation comparable to that witnessed during the COVID pandemic.
