An oil tanker caught fire after a missile attack by Houthi fighters based in Yemen.
The ship's owner, Trafigura, said the Marlin Luanda "was struck by a missile as it transited the Red Sea" on Friday.
The incident happened 60 nautical miles southeast of Aden in Yemen, according to UK Maritime Trade Operations (UKMTO), which oversees the area.
Trafigura confirmed on Saturday afternoon the fire had been extinguished and the vessel has been directed to sail to a safe harbour.
The entire crew is safe and no further ships will be transiting through the area for Trafigura, the commodities trader added.
The UK's defence secretary, Grant Shapps, said the country remains "as committed as ever" to protecting freedom of navigation following the latest "intolerable and illegal" attack by Houthi rebels.
Houthi brigadier general Yahya Saree called the Marlin Luanda a "British" tanker and said the attack was in support "of the oppressed Palestinian people" and in response "to the American-British aggression against our country".
"The vessel is now sailing towards a safe harbour," Trafigura said, adding the firefighting effort had been supported by Indian, US and French navy vessels.
Crew had boarded lifeboats as a precaution but no injuries had been reported, American officials told Sky's US partner NBC News.
The ship is loaded with a flammable liquid called naphtha, which made the fire even more dangerous.
Trafigura says the liquid originates from Russia and was bought "in line with G7 sanctions".
USS Carney and a French frigate responded to the ship's distress call.
The USS Carney was itself targeted by a missile in the Gulf of Aden on Friday, according to the US military, who said the projectile was shot down.
A US official, speaking anonymously, said it was the first time the Houthis had directly targeted an American warship since they began their attacks.
On Saturday morning, an anti-ship missile aimed into the Red Sea was also destroyed, said US Central Command.
The Indian Navy said it also responded to the distress call, adding 22 Indians were part of the crew along with one Bangladeshi.
Houthi attacks continue
However, they have targeted vessels with tenuous or no clear links to Israel, endangering shipping on a key trade route and causing some to sail a much longer route.
Houthi brigadier general Yahya Saree said: "Using a number of appropriate naval missiles, the strike was direct, and resulted the burning of the vessel."
"Yemeni Armed Forces persist with their military operations," he added.
"Enforcing a blockade on Israeli navigation in the Red and Arabian seas until a ceasefire is achieved in Gaza, and food and medicine are allowed in to the besieged Palestinian people in the Gaza Strip."
Shipping data suggests the Marlin Luanda sails under the flag of the Marshall Islands and was on its way to Singapore.
UKMTO warned other ships to sail with caution and report any suspicious activity.
Alongside numerous airstrikes on key Houthi targets, the UK and US are also targeting key figures in the Iran-backed militant group with sanctions.
A second series of UK and US airstrikes, carried out at the start of the week, appears to have done little to deter Houthi action.