Investing.com -- Shares in container companies fell on Tuesday as investors gauged the implications of a potential cease-fire plan in the conflict between Israel and Hamas on shipping lanes through the crucial Red Sea region.
Under the first phase of a resolution approved by the United Nations Security Council on Monday, both Israel and Hamas would immediately bring a halt to hostilities. Israeli hostages currently being held by Hamas would also be released and Israel would withdraw all its forces from the Gaza Strip. According to the Wall Street Journal, the U.S. has said Israel has agreed to the deal, while negotiators for Hamas are waiting for Israel to commit to a permanent ceasefire.
Markets are now assessing how the UN's plan could impact the Red Sea, analysts at Jefferies said in a note to clients. Passage through the area, a major artery for shipping between Europe and China, has been disrupted in recent months by repeated attacks from Houthi rebels in Yemen on commercial shipping vessels in response to the war between Israel and Hamas.
The strikes have led many shipping and logistics providers to divert vessels away from the Red Sea and take longer, more expensive routes around southern Africa's Cape of Good Hope.
Capacity has become tighter and freight rates have risen as a result of the re-routing, leading some shipping groups to lift their annual financial outlooks. Should safe passage be once again assured through the Red Sea, analysts cited by the WSJ have suggested that freight rates could fall, possibly denting returns.
However, Jefferies analysts said it is "unclear" what potential spill-over effects the Gaza peace resolution could have on the region.
Shares in AP Moeller - Maersk (CSE:MAERSKb) and Hapag Lloyd AG (ETR:HLAG) both slipped in European trading on Tuesday, and Asian peers Yang Ming (TW:2609) and Cosco (HK:1919) also dropped.