Could shipping rates be impacted by Israel-Hamas peace plan? Kepler weighs in.

Investing.com - A U.S.-sponsored peace plan between Israel and Hamas has increased the likelihood of a permanent ceasefire in the longstanding conflict, leading to a potential normalization of trade through the Red Sea region that could place downward pressure on shipping rates, according to analysts at Kepler Cheuvreux.

In a note, the analysts led by Axel Styrman suggested that, in the event of a deal being finalized, trade flows through the Red Sea would likely "gradually resume during the next couple of months."

Trade through the Red Sea has been disrupted by attacks from Yemen’s Houthis, who have aimed to hit shipping through a key global artery to protest the war in Gaza. This has previously forced major container industry players, such as Hapag-Lloyd and Maersk, to divert vessels away from the Red Sea and take longer routes -- driving up shipping costs.

But "owing to shorter distances," an end to the Israel-Hamas hostilities could mean that "demand for Container vessels has the potential to decline 5.8% (all other equal) with further downward pressure on spot rates," the Kepler analysts wrote.

Shares of Hapag-Lloyd and Maersk were lower in morning trading on Tuesday.

President Donald Trump and Israeli Prime Minister Benjamin Netanyahu both backed a proposal on Monday which would end the almost two-year-old war in Gaza.

Speaking with Netanyahu, Trump said that a deal was "beyond very close," although he warned that Israel would be given full U.S. support to take whatever action it deems to be necessary against Hamas should the Islamist group reject the offer.

Under the terms outlined in the plan, a so-called "board of peace" -- chaired by Trump and including former British Prime Minister Tony Blair -- would be established to oversee the redevelopment of Gaza and a Palestinian committee responsible for day-to-day operations in the enclave.

However, it remains unclear whether Hamas would agree to the proposal, with a senior official in the militant group claiming that it had not been contacted to participate in the talks on it. Along with an immediate ceasefire and a return of hostages on both sides, provisions of the plan call for the removal of Hamas from power and its disarmament.

Media reports suggested that sticking points could also arise over a potential path to Palestinian statehood.