The Middle East conflict spread to new fronts in July. The Houthis announced a blockade on Saudi Arabian oil shipments through the Bab el-Mandeb strait (the Red Sea’s southern egress point) and enforced the threat with multiple attacks on vessels. Houthi involvement now threatens additional egress routes for Gulf oil supply while a stable re-opening of the Strait of Hormuz (SoH) remains elusive.
Saudi Arabia’s Red Sea crude exports via Yanbu plummeted in late July after the Houthis announced their involvement in the conflict, according to our ship tracking. Yanbu and the East-West Petroline have served as a crucial alternate outlet for Gulf supply amid SoH disruptions. All workaround egress routes that bypass the SoH – including shipping through the Red Sea via Yanbu – have been maximally utilized during the Iran conflict. Saudi Arabian production could be exposed to additional near-term shut-ins if Houthi threats hamper Red Sea shipments moving forward.
However, it is possible that the decrease in Yanbu shipments in late July reflects vessels “going dark” to avoid detection and still transiting the Bab el-Mandeb strait. Additionally, select vessels have continued loading, but re-routed to a northern egress point via the Suez Canal and Sumed Pipeline. If Bab el-Mandeb traffic is specifically disrupted, we expect Red Sea shipments would largely persist but divert to the northern route. This shift in trade flows would significantly increase transit costs and timelines. Cargoes transiting Suez rather than Bab el-Mandeb adds one month to Asian arrival dates and a potential 150 million barrel “gap” in crude arrivals in August and September.
The Dated Brent benchmark oil price averaged US$83.39/bbl in July versus US$85.17/bbl for June. The lower average belied a month of mostly increasing tensions, as the vaunted ceasefire and MoU process between the US and Iran gave way to a resumption of hostilities. In our Macro Oils service, our base case views assume flows normalize in September for both the Strait of Hormuz and the Bab el-Mandeb strait. If disruptions persist into Q4 2026 and beyond, the accumulating supply disruption introduces significant upside risk to oil prices.
Our vessel tracking data will provide critical insight into Middle East movements, including Yanbu Red Sea crude loadings, providing timely insight on how trade flows are developing as the Middle East conflict continues to evolve. - Dylan White, Research Director at Wood Mackenzie.
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