Saudi Arabia has proactively rerouted its grain imports away from the Gulf and Bab-el-Mandeb strait to Red Sea ports accessible via the Suez Canal, a move designed to avoid conflict zones. Tenders for wheat imports into the Kingdom have completely excluded the Gulf port of Dammam, with advance purchases indicating this avoidance will continue until at least October 2026. Similarly, grain vessels from South America destined for western Saudi ports are now largely taking the longer route through the Mediterranean Sea and Suez Canal, bypassing the Cape of Good Hope and Bab-el-Mandeb, as exemplified by the BAHRI ARASCO's recent diversion to Gibraltar and Port Said.
The shift in trade routes is a direct response to a Houthi blockade declared on July 20, which has sharply cut corridor traffic, though grain and fertilizer cargo is still crossing the Bab-el-Mandeb. While the blockade has primarily targeted tankers so far, the increased risk has caused insurance rates for vessels traversing the strait to more than double, reaching 0.75% of hull value. This surge in costs affects all vessels and will eventually filter down to freight rates, even for cargo not directly traversing the strait.
Simultaneously, the Black Sea region continues to face disruptions, with Russian attacks on vessels and Ukrainian counter-attacks impacting grain export infrastructure. Russian wheat shipments have fallen significantly, with August and September 2026 exports estimated at 1.8-2.3 million tons, down over 50% year-on-year from 4.8 million tons. This bottleneck removes a major, low-cost supplier from the market, prompting Asian buyers like Indonesia to turn to alternative sources such as Australian and Argentinian wheat, often at sharply higher prices. Farmers outside Ukraine and Russia, including those in Poland, are benefiting from higher global prices due to these Black Sea disruptions.
Fertilizer trade has also been significantly impacted. Prior to the recent conflicts, less than 10% of Saudi fertilizer exports originated from Red Sea ports, with urea and phosphorus typically leaving from Gulf ports. However, since March, Red Sea exports of phosphates and some urea have increased. While the Hormuz closure previously constrained sulfur and urea exports from the Mideast Gulf, the Bab-el-Mandeb strait has absorbed more of the recent substitution in fertilizer trade, largely serving India, Djibouti, Indonesia, and China. Despite not being directly targeted by the current blockade, the rising insurance costs and logistical complexities are increasing the overall cost of these vital commodities, potentially leading to fertilizer demand rationing and impacting crop production in 2027.
Overall, the combined impact of the Bab-el-Mandeb blockade and ongoing Black Sea conflicts is leading to significant rerouting of global grain and fertilizer trade, higher shipping costs, and a tightening of global commodity markets, particularly affecting large population centers in Asia dependent on these imports.
