Shipping stocks surge globally as US, UK strike at Houthis

Shipping and energy stocks extended gains on Friday, after the US and UK launched airstrikes on Houthi targets in Yemen, sending crude higher and stoking expectations that shipping rates will remain elevated.

German shipping firm Hapag-Lloyd AG rose as much as 4.8% while A.P. Moller - Maersk A/S gained as much as 3.9%. Oslo-based Frontline Plc jumped more than 5%, while Danish peers DSV A/S, D/S Norden A/S and DFDS A/S also advanced. In US premarket trading, ZIM Integrated Shipping rose 5.8%.

Asian shipping names surged earlier in the day, with Korea Line Corp. jumping as much as 24%. 

The majority of these shipping stocks are set for a second straight month of gains, amid expectations that lengthy detours to avoid the Red Sea rebel attacks will boost freight rates. The Houthis started attacking ships in mid-November, ostensibly in support of Hamas, and have said they won’t back down until Israel stops fighting in Gaza.

Meanwhile, shares in European oil majors such as Shell Plc and TotalEnergies SE got a boost as Brent crude futures topped $80 a barrel for the first time this year. 

“The ripple effects from increased geopolitical tensions in the Red Sea are driving shipping rates and valuations up,” said Bloomberg Intelligence analyst Lee Klaskow. 

Dry-bulk freight rates — for large shipments, including of commodities — have surged 75% on average so far in 2024, potentially boosting shippers’ earnings, Klaskow noted. Hapag-Lloyd shares have risen almost 20% so far this year, while Maersk is up about 9%. Klaskow says, moreover that the sector still trades a discount to the broader markets.

Still, some market participants see the Red Sea disruption as temporary. 

“As such, we don’t expect a lasting impact on inflation or a major long-term shift in earnings for logistics and shipping companies,” said Joachim Klement, a strategist at Liberum.