Oil prices surged, with Brent crude futures up 1.3% to $92.15 a barrel and West Texas Intermediate rising 1.1% to $85.29, following Houthi threats of a naval blockade in the Red Sea. These threats prompted three Saudi crude oil tankers – the Xin Long Yang (carrying 2 million barrels for China), the Rodos (700,000 barrels for India), and the Amazon (for India) – to make U-turns in the Red Sea and reroute towards the Suez Canal. This comes as the US launched its 11th night of strikes on Iran, and the International Energy Agency warned of "no room for complacency on oil security."
This rerouting is a significant disruption, especially for Asian nations like India and China, which heavily rely on Gulf oil imports. Saudi Arabia, in particular, has increased oil exports through its Red Sea port of Yanbu, with shipments through the Bab el-Mandeb Strait reaching a record of over 4 million barrels per day last month. The Bab el-Mandeb, a critical chokepoint connecting the Red Sea to the Gulf of Arabia, is vital for around 12% of global trade and a quarter of container traffic. Its disruption, alongside the ongoing issues in the Strait of Hormuz, creates pressure on two of the world's most important maritime routes.
The alternative routes, such as transit via the Suez Canal and potentially around Africa's Cape of Good Hope, will add weeks to delivery times and significantly increase freight and fuel costs. British maritime security company Ambrey has advised vessels calling at Saudi Arabian ports to reconsider transiting the Red Sea due to high risk, and war risk insurance costs have already risen. Analysts are concerned about the implications for oil supply chains and potential price volatility, with some previously warning prices could reach as high as $200 a barrel in similar past conflict scenarios, though they peaked at $126 a barrel.
