How Israel–Iran conflict escalation could impact Middle East cruise industry

Middle East cruise industry navigates shifting dynamics as regional tensions raise questions around 2025/26 deployments.

The cruise industry in the Middle East, riding a robust wave of demand, enters the 2025/26 season with strong momentum, though recent geopolitical developments introduce new variables.

The scale of the operation marks a potentially significant shift in the regional geopolitical environment. For cruise operators with a growing presence in the Arabian Gulf and Eastern Mediterranean, the impact will depend on how the situation develops in the coming weeks and months.

Markets responded with short-term volatility, with cruise stocks including Royal Caribbean, Norwegian, and Carnival Corporation experiencing modest declines amid the uncertainty and the immediate rise in oil prices.Historically, such tensions have directly influenced cruise itineraries—when conflict between Israel and Hamas escalated in late 2023, ports like Haifa and Ashdod were withdrawn from Mediterranean schedules. Similarly, should the current tensions spread beyond the Red Sea to the Gulf of Aden and Strait of Hormuz—cruise lines will be forced to reroute affected itineraries.

At the time of writing, commercial shipping through the Arabian Gulf and Red Sea continued unobstructed, but war risk alerts are already rising, and insurers warn ships may be targeted—particularly if tensions expand to include non-state actors operating in maritime corridors beyond the Red Sea.

While the risk to cruise ships in the Arabian Gulf will remain low, especially for vessels homeporting in the United Arab Emirates, one of the safest countries in the world, the situation may result in increased costs for certain routing scenarios. As was seen during the emergence of security uncertainty in Red Sea, however, key Gulf ports such as Dubai and Abu Dhabi remain well-positioned to accommodate operational adjustments.

Insurance for vessels transiting volatile regions such as the Red Sea climbed from a negligible 0.7-1% of a ship’s hull value to 2% following US airstrikes on Houthis in Yemen in March, increasing operational costs significantly. For a US$500 million cruise ship, a single Red Sea transit could cost US$5 million dollars extra in insurance. In the wake of Houthi activities in the Red Sea, MSC canceled sailings from Dubai and Jeddah in late 2024 and early 2025. Similarly, Carnival and Royal Caribbean bypassed the Red Sea in 2024 due to rising hostilities. 

The latest regional tensions will therefore likely result in reduced Red Sea deployments for the upcoming season, as cruise lines continue to assess safe and commercially viable alternatives.

What makes the current escalation more complex is the possibility of multi-front retaliation, including the Houthis in Yemen, Hezbollah in Lebanon, and Iran-aligned militias in Syria and Iraq. For cruise operators, this raises operational considerations regarding itineraries passing through the Suez Canal, transiting the Gulf of Oman, or calling on ports in countries bordering Iran. It should be noted, however, that Hezbollah’s immediate response to the airstrikes by Israel contained no threat of military retaliation.

Consumer sentiment, notoriously sensitive to perceptions of safety, will create significant headwinds for cruise lines operating in the region. Even the threat of conflict in the wider region may influence traveller decision-making, particularly among international markets and passengers unfamiliar with the region’s broader safety record considering fly-cruise packages in the region. 

During the recent Cruise Arabia Alliance panel at Arabian Travel Market in Dubai, Janet Parton, VP Business Development (UK, Europe, Australia), Celestyal Cruises, which homeported in the region for the first time last year, pointed out that the American market in particular had a highly risk-averse attitude toward cruising in the region. 

“We saw strong interest from the UK, as well as Eastern and Western Europe, Japan, China—and notably, North America,” Parton said in reference to market demand for its first season in the Arabian Gulf. “When we first launched the product, I’ll be honest, the North American market was quite hesitant. It was interesting. I think part of the hesitation came from looking at the map—there was a lack of understanding, and perhaps some concerns about regional stability.”

Traveller sentiment is highly responsive to media narratives and perceived risks, with previous episodes leading to temporary dips in forward bookings; analysis after prior flare-ups showed a 26% drop in regional travel reservations, and for cruise lines largely dependant on fly-cruise markets in Europe, Asia, and North America, the lower demand, coupled with flight disruptions, could present short-term demand challenges for select source markets. 

However, the Middle East cruise sector—particularly the UAE—has demonstrated resilience, adaptability, and continued growth even amid broader global disruptions. In the wake of the COVID-19 pandemic, the Arabian Gulf, particularly the UAE, bounced back quickly in terms of cruise demand, and at the Arabian Travel Market earlier this year, cruise line executives emphasised that the region is one of the greatest growth opportunities globally.

“The Middle East plays a very important role in our global strategy,” Angelo Capurro, Executive Director, MSC Cruises said. “MSC Euribia [in Dubai] was the top-performing ship during the winter season—better than the Caribbean, South America, or even the Mediterranean. There is clearly strong appetite for cruising here, and the decision to bring her back was led entirely by that performance.”

This optimism was born out by the Red Sea security crisis, which forced all cruise lines to reroute around the region, but MSC Cruises, AIDA Cruises, TUI Cruises, and Costa Cruises, longtime homeporting cruise lines in the Arabian Gulf, continued to sail annual winter seasons out of Dubai, Abu Dhabi, and Doha.

As the 2025/26 season approaches, the region’s cruise industry is navigating a key moment, balancing strong fundamentals with evolving global dynamics. The events of June 2025 could mark a temporary disruption, or they may trigger a broader reassessment of regional viability. Much will depend on the pace and scope of any retaliation, the response from global powers, and the ability of cruise lines to adapt quickly. 

With cruise ships due to return to the Arabian Gulf in November for the 2025/26 season, the industry watches and waits, preparing for a season that will test its adaptability and proven long-term resilience.