eThe escalation of Houthi attacks against Israeli targets points to potential future maritime sabotage, threatening to reshape global tanker trade flows and introduce significant inefficiencies into an already strained supply chain. We analyze how rerouting crude oil exports via the Cape of Good Hope could increase nearly three tons of mileage from Yanbu, favor specific tanker standards, and shift clean products trade in unexpected directions.
Overview of the current situation
On March 28, the Houthis in Yemen announced the launch of ballistic missiles against Israeli infrastructure – marking one month of escalating tensions between the United States and Iran. While the attacks remained limited to land targets, this escalation heralds a possible return to sabotage of commercial ships through the Red Sea and the Bab al-Mandab Strait. Our analysis uses Kpler ship and cargo tracking data to determine the effects of rerouting and tilting.
Key takeaways
- Houthi attacks currently target Israeli infrastructure rather than commercial shipping, but military pressure on Iran could lead to renewed maritime sabotage.
- Rerouting Yanbu ore exports via COGH would be approximately three tonne-miles, with Suezmax and Atlantic VLCC standards being preferred.
- In contrast to the 2024 east-west LR2 push, the current support stems from west-to-east trades, and from a shift of UK/Continent MR volumes towards LR2s.
Impact on crude oil trade
Control of BeM has become increasingly important to crude oil trade since the beginning of the regional conflict. The virtual closure of the Strait of Hormuz forced Saudi Arabia to redirect its exports to the Red Sea via the East-West Pipeline. Exports rose to 4.6 million barrels per day in the second half of March, compared to about 760,000 barrels per day during 2025.
Change route preferences
While SoH crossovers dominate market attention, friction in BeM routing emerged earlier in the conflict. This pattern is most evident in UK/Continental (excluding Russia) trade to markets east of Suez:
- Following the November ceasefire between Israel and Hamas, flows briefly resumed through the Suez Canal.
- By March, the Cape of Good Hope had re-emerged as the preferred route.
- At least 60% of running volumes are now opting for the longer COGH route.
- Affected grades include CPC, BTC, and Forties.
Recent Houthi engagement should support COGH as the preferred path for these deals, and support the TD6 and TD19 criteria.
Potential disruption scenarios
If commercial shipping becomes a target in BeM – whether by the Houthis or Iran directly – we expect the following consequences:
Logistical challenges in light of the turmoil
A complete disruption of the BeM would force Saudi Arabia’s production to head west through the Suez Canal and around the COGH to serve Asian buyers.
This creates major shortcomings:
- Cargo downsizing: Ships will need to convert from VLCCs to Suez Max tankers, or operate VLCCs at partial loads to comply with Suez Canal draft limits.
- Optimizing loading operations: Yanbu terminal operations will require restructuring to improve loading operations for small or partially loaded vessels.
- Suez Congestion Management: Increased traffic through the canal would lead to bottlenecks.
- Development of shuttle trade: Market economics may support shuttle services out of the Suez Canal, followed by reverse transportation in the Mediterranean.
- Increased ballast legs: More empty return flights would amplify demand dynamics.
Effects of market rebalancing
In a more realistic approach, flows to the East will moderate the economics of shipping. European refiners are likely to take a larger share of the Red Sea barrels, freeing up Atlantic production for Asian markets. This shift would enhance the standards of Atlantic supertankers (TD15/TD22) at the expense of medium-sized transatlantic tankers (TD25, TD27).
History shows that a portion of the shipping community is still able to take risks. Some operators may continue to traverse the BeM while engaging in dark activity – where transceivers are turned on with them disabled to avoid detection.
Impact on the trade of clean petroleum products
Clean Petroleum Products (CPP) trading presents a different picture than crude oil markets. CPP production in the Red Sea continues to flow overwhelmingly westward, reducing the volume that requires rerouting through Africa.
Regional exposure to shipping is increasing
In the wake of the loss of oil volumes in the Middle East and Gulf (MEG) region, East Asia and Southeast Asia have increasingly relied on Saudi CPP supplies from the Red Sea. This exposes the two already disproportionately affected regions to higher shipping costs.
Changing dynamics of the tanker sector
Returning to 2024, the Clean Trade LR2 emerged as a major beneficiary of the Red Sea crisis, as east-west trade shifted to much longer hauls than COGH, boosting demand for larger ships.
A similar increase in tons and miles for this particular route seems unlikely to occur in the new disruption scenario. Several factors reduced westward flows:
- Loss of MEG CPP exports.
- Downward adjustment in crude processing capacity in the East.
- Increasing protectionism in origin markets.
- Volumes have fallen to 90,000 bpd so far in March versus an average of 950,000 bpd through 2025.
Trade from West to East takes the lead
This time, we’re seeing increases in LR2 shipping driven by west-to-east trade:
- Algerian naphtha boom: A significant increase in Algerian naphtha exports to the east on LR2s is supporting demand.
- UK/Continent Flows to East Africa/Asia: The SoH crisis has boosted trade flows on MRs.
- Increased pressure: If Suez transit becomes restricted, MR shipments will likely shift to LR2s.
- TC15 Standard Support: These dynamics in particular boost TC15 ratings.
Future implications and market outlook
The current situation presents multiple paths, each with distinct implications for global tanker markets and supply chains.
Near-term scenarios
Scenario 1: Maintain the status quo
- Houthi attacks are still limited to Israeli ground targets.
- Commercial shipping continues with higher risk premiums.
- COGH routing preferences continue for trades from the UK/Continent to Asia.
Second scenario: renewed maritime sabotage
- Military pressure on Iran leads to Houthi (or Iranian) attacks on commercial ships.
- BeM transits have become unacceptable for most operators.
- Tons of miles go up with almost all traffic rerouted through COGH.
- Suezmax and Atlantic VLCC standards are greatly enhanced.
Third scenario: stopping regional escalation
- Diplomatic progress reduces tensions.
- Gradual return to crossing BeM.
- Rate premiums return to normal in 6-12 months.
Structural changes in the market
Regardless of the near-term outcomes, several structural changes appear likely to persist:
- Increased demand for tankers: Longer journey distances support higher utilization rates.
- Ship Class Preferences: Suez Max vessels are of relative importance for trade originating in the Red Sea.
- Regional Supply Chain Adjustments: Asian refiners are diversifying their sourcing away from choke point routes.
- Normalization of risk premiums: High war risk insurance costs have become an integral part of shipping calculations.
Frequently asked questions
What are the potential risks of commercial shipping?
Merchant ships face multiple risks in the current environment. A direct attack with Houthi missiles or drones represents the most serious threat. War risk insurance premiums increased significantly for Red Sea and BeM crossings. Operators must also consider reputational risks and crew safety concerns when routing through contested waters.
How could these attacks affect global oil prices?
Disrupting BeM transits would not directly reduce global oil supplies – Saudi Arabia could reroute exports via alternative routes. However, increased transportation costs and longer journey times will likely translate into higher crude oil prices for Asian buyers. European refiners may benefit from improved access to Red Sea barrels, which could narrow regional price differentials.
Which tanker sectors benefit most from continued disruption?
Suezmax-class VLCCs and VLCCs stationed in the Atlantic are expected to make the most of the ongoing BeM disruption. For clean products, LR2s benefit from growing West-East trade and increasing MR shipment volumes. Medium-sized transatlantic ships (Aframaxes) may see relative weakness as Atlantic crude flows increasingly shift eastward.
How long can these disturbances last?
Historical precedent suggests that maritime security concerns can persist for long periods. The previous Houthi campaign against shipping in the Red Sea lasted for more than 12 months before a ceasefire in November 2024. Current geopolitical dynamics – particularly tensions between the United States and Iran – suggest that elevated risks may continue into 2025 and perhaps beyond.
conclusion
Growing Houthi risks introduce another layer of uncertainty into global tanker trade flows. While attacks currently target Israeli infrastructure rather than commercial shipping, the potential for maritime sabotage remains high. Market participants should prepare for scenarios in which BeM transit becomes restricted, nearly tripling Red Sea crude exports and shifting trade in clean products in unexpected directions.
The beneficiaries of the ongoing disruption seem clear: the Suez Max tankers, the Atlantic VLCCs, and the LR2 tankers that support trade from west to east. Mid-sized companies across the Atlantic and traditional clean product routes from MEG to the West face relative headwinds.
We continue to monitor these developments closely, and provide commodity market intelligence to help our clients navigate an increasingly complex geopolitical landscape. Kpler’s vessel and cargo tracking platform provides near real-time visibility to help customers evaluate rerouting, ton-mile impacts, and rate changes.
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Source: Kepler
