Traders and analysts said that the Houthis’ naval blockade of Saudi Arabia has collectively changed the course of crude oil supplies, reducing global tanker supplies and raising shipping rates, increasing pressure on the already stressed global oil market.
Saudi Arabia is increasingly relying on the East-West Pipeline as an outlet for its crude oil, allowing Asian buyers to lift cargo from Yanbu on the Red Sea without relying on the Strait of Hormuz.
About 3.9 million barrels per day of crude oil was loaded from Yanbu in the second quarter of 2026, more than double last year’s level, almost 80% of which went east of Suez, according to location signals detected by S&P Global.
However, since the Yemeni Houthi militia announced its blockade, most shipping operators have treated the transit of southbound Saudi oil through the Bab al-Mandab Strait as a complete no-no, choosing instead to leave the Red Sea via the Suez Canal and circumnavigate the entire African continent in order to reach Asia.
“If you are thinking about Yanbu crude going to China, instead of going through Bab el-Mandeb, you now have to go through the Cape, which adds more than 30 days of sailing,” Andrea Ulivi, head of shipping at Trafigura, told Platts, part of S&P Global Energy, on July 28.
The change in route raised questions about the amount of Saudi crude that could make the long journey to Asia, instead of being captured by European refiners. It has also revealed a severe shortage of available vessels, especially very large crude carriers, in the Atlantic and Mediterranean basins, which are now burdened with additional itineraries and higher fuel costs.
Giant oil tankers cannot cross the Suez Canal at full capacity, but they can reduce their load to make the trip. Some loaded ships could get additional volumes of crude on the other side of the canal by loading at Sidi Kerir in Egypt, an exit point for Egypt’s SUMED pipeline, said Kevin Zhao, a shipping analyst at S&P Global Horizons. However, ballast availability west of Suez is only 74 VLCC units, representing about 10% of the main fleet, according to a July 24 memo from Gibson shipbrokers.
As a result, rates rose. Platts estimated the cost of transporting 270,000 metric tons of crude oil from Yanbu to the Far East at $66.87 per metric ton on July 28, up from $32 per metric ton when it launched in early May.
Shipper caution
The shipping industry took the Houthi threat seriously. Academy data showed that traffic through Bab al-Mandab fell to about three-quarters of its levels in early July, with most ships moving south from non-Saudi ports.
The number of ships wishing to make the journey has been affected by recent threats to physical infrastructure, with the Houthis announcing recent drone and missile attacks on “sensitive Aramco facilities” in both Jizan and Yanbu, as well as a new attack on an oil tanker on July 28. Neither Aramco nor the Saudi Ministry of Energy commented on these statements.
“Even without imposing a full blockade, the Houthis have shown time and again that they just need to create enough uncertainty for commercial operators, insurers and charterers to reconsider their routing decisions,” Greek shipbroker Exclusive said on July 27.
Gibson said shipping costs for the Yanbu route to Asia are expected to rise from a recent assessment of $5 per barrel to a mid-to-high $9 per barrel via Suez and the Cape of Good Hope, assuming shipping rates remain roughly constant.
Leading fuel supplier Peninsula said prices may find further support from rising fuel costs, which says diversions around the Cape could require an additional 1,500 tonnes of fuel and more than double the operating costs of tankers.
“The industry can deal with a sudden and significant increase in fuel consumption,” said Kenny McLean, the company’s chief operating officer. “This is more complex than just planning a longer route – it will require a fundamental recalibration of the economics of the flight.”
However, Gibson said Asian buyers may have no choice but to absorb the higher costs of withdrawing Saudi crude. Academy data showed that major buyers such as China and South Korea have recently relied on crude from Russia, Brazil and the United Arab Emirates. However, ongoing disruptions in the Strait of Hormuz have limited alternatives for Saudi medium and heavy crude, while new attacks in the Black Sea create further upside price risks.
Clean products
On the refined products side, Saudi Arabia exported nearly 1.1 million barrels per day from its Red Sea ports in the second quarter, most of it bound for Europe and East Africa, CAS data showed.
Gibson said traditional suppliers such as India’s west coast and Oman’s Duqm refinery usually fill the shortfall, but weak east-west arbitrage economics kept barrels directed towards Asia. BRS, another freight broker, has noticed signs of some product tankers making the rounds around the Cape, where two LR aircraft were recently installed to transport Saudi naphtha to Asia via Suez.
Before the Houthi blockade, nearly 100 Aframax aircraft and LR2s had already joined the “dirty” fleet since late 2025, CAS data showed, tightening availability in the clean sector. High interest rates will only increase pressure on oil products markets, which are already demanding historic premiums on crude oil, with growing concern about Gulf supply shortfalls and declining inventories.
Platts assessed the price of transporting 55,000 metric tons of refined products from the Red Sea to Japan at US$87.78 per metric ton on July 28, higher than the five-year average of US$56.94 per metric ton. The equivalent price for a 90,000 metric ton shipment moving from the Red Sea to the UK/Continent was US$40.83 per metric ton.
source: Platts
