Transpacific Rate Drop and Middle East Ceasefire: A Fragile Calm in Global Freight

Freightos Weekly Update, dated June 24, 2025, paints a picture of shifting tides in the global freight market. Transpacific container spot rates are plummeting, with West Coast rates dropping to $3,500/FEU from a recent high of $5,800/FEU, a decline fueled by oversupply and waning demand following the May 12 China-US tariff deescalation. Meanwhile, a tenuous Israel-Iran ceasefire is offering a cautious reprieve from potential disruptions in the Strait of Hormuz, though the situation remains precarious. As supply chain professionals digest these developments, the interplay of geopolitics, tariff deadlines, and market dynamics warrants a closer look—and a healthy dose of skepticism.

A Rate Rollercoaster: Too Much Capacity, Too Little Demand?

According to Zvi Schreiber, CEO of Freightos, the sharp fall in transpacific rates, particularly to the West Coast, reflects a classic case of miscalculation. Carriers, anticipating a sustained demand surge after the tariff pause, boosted capacity by 13% since March, only to find the post-deescalation rush fading faster than expected. Freightos data shows West Coast rates down 7% in a week, with East Coast rates slipping to $6,300/FEU from $7,200/FEU. This oversupply, coupled with a leveling off of Asia-Europe rates at $3,100/FEU and a 9% drop in Asia-Mediterranean rates to $4,400/FEU, suggests carriers may have overreacted to the initial demand spike. Yet, prices remain 30%-50% above late May levels, hinting that the market hasn’t fully stabilized—and peak season pressures could still stir the pot.

The narrative of a demand slump post-tariff pause raises questions. Was the initial surge more panic-driven than strategic, with shippers frontloading to beat an August 12 deadline that now seems less urgent? Some industry voices, like those cited by Freightos, suggest the peak season rush may already be waning, potentially leaving carriers with excess capacity through the summer. However, this assumes a China-US trade deal is near, a prospect muddied by Trump’s recent silence on progress since his optimistic announcement two weeks ago. Without concrete details, it’s hard to trust that rates won’t rebound if negotiations falter.

Middle East Ceasefire: A Temporary Fix or False Hope?

The Israel-Iran ceasefire, brokered after a measured Iranian response to U.S. strikes, has averted immediate fears of a Strait of Hormuz closure—a move that could have choked 20% of global oil supply and disrupted key hubs like Dubai’s Port of Jebel Ali. Freightos notes that tanker flows and Israeli ports (Haifa and Ashdod) remained operational during the 12-day conflict, with air cargo capacity in the Gulf recovering after brief airspace closures. This resilience is reassuring, but the ceasefire’s fragility casts doubt on its longevity. If tensions reignite, the logistics ripple effects could be swift and severe, despite current stability.

The lack of container rate volatility in Israeli lanes, despite carrier diversions from Haifa to Ashdod, suggests the market adapted quickly—a testament to the industry’s agility or perhaps a sign that Middle East trade volumes are less critical than assumed. Yet, the 20% oil supply vulnerability remains a wildcard. Oil price spikes, even if mitigated by current supply levels, could inflate fuel costs and indirectly pressure freight rates. The industry’s relief might be premature if geopolitical fault lines shift again.

Zvi Schreiber, CEO of Freightos

Tariff Deadlines Loom: Chaos or Compromise?

With the July 9 deadline for reciprocal tariffs on countries beyond China approaching—and the August 12 China-US deadline looming—uncertainty reigns. Trump’s threat to unilaterally impose tariffs contrasts with administration hints of extensions for “good faith” negotiations, leaving traders in limbo. The tentative U.S.-UK deal offers a glimmer of progress, but stalled talks with the EU, Canada, and Vietnam signal potential trouble. Freightos highlights that even a finalized China deal might keep a 30% baseline tariff, with additional duties on fentanyl-related goods and existing 301 tariffs complicating the picture.

This tariff ambiguity could suppress demand further, as shippers hesitate to commit amid mixed signals. The 13% capacity increase on transpacific routes might prove a costly misstep if trade volumes don’t recover. Conversely, a last-minute deal could trigger another frontloading frenzy, reversing the current rate decline. The lack of transparency from the White House fuels skepticism—promises of resolution often crumble under political pressure, and the freight sector has seen enough volatility to distrust optimistic forecasts.

Air Cargo’s Steady Climb Amid Regional Jitters

In air cargo, Middle East-North America rates rose to $3.00/kg from $2.50/kg, likely due to flight cancellations during the conflict, though other Middle East lanes held steady. Globally, Freightos Air Index data shows slight easing, with China-North America rates at $5.18/kg and China-North Europe at $3.61/kg. This stability contrasts with ocean freight’s volatility, suggesting air cargo’s resilience—or perhaps its insulation from the oversupply hitting sea lanes. The Middle East spike, however, hints at lingering regional risks, even with airspace reopening.

A Cautious Outlook

The freight market stands at a crossroads. Falling transpacific rates signal a correction, but oversupply and tariff uncertainty could prolong the downturn or spark a sudden reversal. The Israel-Iran ceasefire offers a temporary breather, yet the Strait of Hormuz’s strategic importance keeps it a potential flashpoint. As attention shifts back to U.S. trade policies, supply chain leaders must weigh the data against geopolitical risks. History suggests that calm waters in logistics often precede unexpected storms—prudence, not complacency, should guide the road ahead.