A joint military operation by the United States and Israel against targets in Iran on February 28 — followed by retaliatory action — has sharply escalated tensions in the Middle East, casting serious doubt on any large-scale return of container shipping to the Red Sea in 2026.

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According to Xeneta Chief Analyst Peter Sand, the renewed conflict will likely intensify the “weaponization” of trade and force carriers to maintain diversions around the Cape of Good Hope rather than resume Suez Canal transits.

Carriers had cautiously begun restoring select east–west services via the Suez Canal after rerouting vessels around the Cape of Good Hope since late 2023 due to attacks by Iran-backed Houthi forces in the Red Sea. That tentative shift now appears set to reverse.

“If Houthi militia resume attacks, carriers will once again prioritize the safety of crew, ships, and cargo,” Sand said, warning that any phased normalization through the Red Sea next year is likely to be postponed indefinitely.

Carriers Already on Alert

Major liners had already signaled caution. France-based CMA CGM recently reversed plans to return its FAL1, FAL3, and MEX services to the Red Sea, citing geopolitical uncertainty. Meanwhile, Maersk announced earlier this week that its ME11 and MECL services would reroute around southern Africa due to mounting security risks.

The continued reliance on the Cape of Good Hope effectively absorbs an estimated 2.5 million TEU of global container capacity due to longer sailing distances, tightening fleet availability and keeping transit times elevated.

A broad reopening of Red Sea routes would have released that capacity back into the market, potentially accelerating the decline in freight rates. That scenario now appears unlikely.

Freight Rates: Softer, But Not Collapsing

Spot rates have already been trending downward in 2026. Average rates from China to the U.S. West Coast and East Coast have fallen 35% and 32%, respectively, since the start of the year. From China to North Europe and the Mediterranean — the lanes most affected by Red Sea diversions — rates have dropped 23% and 33%.

However, Sand noted that without a large-scale return to Suez Canal transits, rates may soften more gradually in the second half of the year rather than collapsing outright.

Despite recent declines, rates remain significantly above pre-crisis levels. Compared to December 1, 2023 — before widespread Red Sea disruptions — average spot rates from China to North Europe and the Mediterranean are still up 48% and 79%, respectively.

Persian Gulf Faces Regional Disruption

While container services in the Persian Gulf have so far continued operating, the escalation raises fresh concerns. Sand indicated that vessels may now limit time spent in the region, with carriers potentially omitting calls at key hubs such as Port of Jebel Ali if security risks intensify.

Spot rates from China to the UAE have already risen 5% since mid-February, reaching $1,572 per FEU — reflecting shipper anxiety over potential access constraints.

If ports in the Persian Gulf become temporarily inaccessible, carriers could discharge cargo at alternative regional ports for onward trucking, creating localized congestion and supply chain disruption. However, the broader global impact would likely remain smaller than the systemic shock caused by prolonged Red Sea instability.

Trade Routes Once Again in the Crosshairs

The latest escalation underscores the fragile intersection between geopolitics and global trade. With carriers once again on high alert, the prospect of normalized Red Sea transits — and the capacity relief they would bring — has been pushed further out of reach.

For container markets already grappling with softening demand and a swelling orderbook, the renewed security threat adds another layer of unpredictability to an already volatile 2026 outlook.