Houthi Threats Put Saudi Arabia's Red Sea Oil Export Lifeline at Risk, Kpler Says
Saudi Arabia's bypass for disrupted Strait of Hormuz oil shipments is facing renewed pressure after Yemen's Houthi rebels threatened a maritime embargo, raising concerns that a second strategic chokepoint could complicate global crude flows, Kpler strategists said in a note on Wednesday.The threat has yet to cause widespread disruption, with most tankers continuing to operate via the Bab el-Mandeb strait, but shipowners and traders are already reassessing risks.Homayoun Falakshahi, head of crude oil analysis at Kpler, said that the market response is focused less on immediate supply losses and more on the potential for higher freight costs, rising war-risk premiums and tighter availability of Middle Eastern crude grades.Saudi Arabia has increasingly relied on its Red Sea export terminals at Yanbu after traffic through the Hormuz was severely reduced following escalating regional tensions.Since April, Kpler said about 3.5 million barrels per day of Saudi crude has moved through the Red Sea route, compared with an average of about 120,000 b/d before the conflict.The Houthi announcement threatens that alternative route, effectively putting Riyadh's Hormuz bypass strategy under pressure.Kpler said that shipping activity has shown early signs of caution. Several vessels have altered course or paused voyages as operators assess security conditions, similar to the behavior seen during the Red Sea shipping disruptions of 2023/25.The latest shipping data showed selective changes rather than a broad withdrawal from the route.An Aframax tanker carrying Saudi crude to India reversed course after heading toward the Gulf of Aden, while another vessel carrying Yanbu cargoes continued transiting normally.A tanker transporting Sudanese Dar blend also diverted from its route toward the Gulf of Aden and moved closer to the Sudanese coast, highlighting how operators are making case-by-case decisions rather than abandoning Bab el-Mandeb entirely.Kpler said the selective nature of these moves suggests that the market is responding to elevated risk rather than a confirmed physical blockade.Meanwhile, the latest threat is already influencing crude pricing. Brent has strengthened relative to Dubai as buyers seek alternatives outside the Middle East, widening the Brent-Dubai Exchange of Futures for Swaps toward $10 per barrel.Dubai's prompt structure has also firmed, with the M1-M3 spread rising above $1.50/bbl as concerns grow over near-term availability of medium sour barrels.A prolonged increase in shipping risk could further support medium sour crude differentials, particularly as longer voyages, higher insurance costs and potential vessel substitutions increase transportation expenses.Kpler said market participants are viewing Atlantic Basin barrels as increasingly attractive as refiners diversify away from Middle East supply risk.The immediate vulnerability is concentrated among Asian refiners, particularly in Northeast Asia, where Saudi Arab grades remain an important source of medium sour crude.Asia-bound Saudi cargoes now represent the majority of Bab el-Mandeb crude traffic, meaning any disruption to Yanbu exports would disproportionately affect buyers in China, South Korea and Japan, Falakshahi said.Kpler said that unlike Hormuz, where a disruption could affect a much larger share of global oil flows, the Bab el-Mandeb risk is more targeted. However, its importance has increased because Saudi Arabia has shifted more exports through the route.