Escalating tensions in the Middle East are reshaping expectations for the global container shipping market, potentially easing long-standing concerns about a looming wave of vessel overcapacity.

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Ongoing disruptions in the Red Sea are forcing carriers to reroute ships away from the Suez Canal, significantly increasing voyage distances and absorbing more fleet capacity. The longer sailing routes are keeping freight markets tighter than analysts previously anticipated.

According to Jonathan Roach, a container market analyst at Braemar, geopolitical tensions are increasingly influencing the delicate balance between supply and demand in container shipping.

Roach noted that current projections indicate the global container fleet will expand by roughly 4% in 2026, rising to around 8% in 2027, and potentially 12% by 2028 as the industry’s substantial orderbook of new vessels enters service. The influx of new ships has fueled widespread concerns that the sector could face significant overcapacity in the coming years.

Red Sea Crisis Alters Timeline

In its January market outlook, Braemar had expected container lines to gradually resume transits through the Suez Canal during the first half of 2026, with conditions normalizing later in the year.

However, the escalation of hostilities in the region has cast doubt on that timeline.

“This scenario now appears unlikely, and it is possible that Red Sea diversions could remain in place throughout 2026,” Roach said. “If that happens, containerships may not return to regular Suez Canal transits until 2027.”

The shift to longer routes—primarily around the Cape of Good Hope—significantly increases sailing distances and transit times. While this adds operational costs, it also raises vessel utilization and effectively reduces the amount of available shipping capacity in the market.

Overcapacity Outlook Shifts

Under normal operating conditions, Braemar previously estimated that container shipping overcapacity could reach about 14% in 2026, rising to 20% in 2027 and potentially 30% by 2028.

But if container lines continue avoiding the Suez Canal, the effective oversupply picture could change considerably.

Braemar calculations suggest that rerouting around the Cape of Good Hope could cut effective overcapacity to roughly 5% in 2026, 11% in 2027, and about 22% in 2028.

The surge in container ship orders placed in the wake of the pandemic may also prove more beneficial than initially feared. Longer voyage cycles require more vessels to maintain service frequency, effectively absorbing additional tonnage entering the market.

“This dynamic helps explain why liner operators have continued investing in newbuildings,” Roach said, adding that developments in the Middle East could shape the fortunes of the container shipping sector through 2026.

Market Momentum Shifts Toward Carriers

Other analysts say the latest geopolitical escalation has already shifted bargaining power back toward carriers.

Peter Sand, chief analyst at Xeneta, said the conflict has quickly altered freight market dynamics.

Speaking on The Loadstar podcast, Sand noted that the renewed tensions in the Middle East have strengthened carriers’ pricing power.

“We got a complete reversal of fortunes with the strikes beginning in the Middle East,” Sand said. “Literally, the tables turned—carriers now have the upper hand and are in no rush, as they expect elevated freight rates in the near term.”

As long as shipping routes remain disrupted, the geopolitical crisis may continue to offset the industry’s expanding fleet—temporarily delaying the overcapacity pressures that many analysts had expected to dominate the container market later this decade.