Saudi Arabia Reroutes Oil Through Hormuz Amid Pipeline Attacks

Saudi Arabia has returned to shipping crude oil through the Strait of Hormuz after attacks by Iran-backed Houthi militants in the Red Sea and drone strikes from Iraq disabled its alternative bypass routes. The East-West pipeline remains shut, forcing Saudi Aramco to load oil at the Ras Tanura terminal in the Persian Gulf.

To mitigate risks, Gulf producers have implemented a ship-to-ship transfer system in the Gulf of Oman. Pioneered by the Abu Dhabi National Oil Company in April, the system uses shuttle tankers to move crude from terminals to safer waters, where cargoes are transferred to larger vessels bound for Asia. While this workaround has prevented a severe supply shock—with Hormuz exports reaching 6.5 million barrels per day in September—it has caused shipping costs to surge. Some routes have jumped from $4.5 million to nearly $63 million per trip, with freight rates for very large crude carriers to China exceeding $30 per barrel.

These disruptions have pushed Saudi oil production to a multidecade low and increased global inflation fears regarding gasoline and diesel costs. The United States military continues to provide naval protection and suppress Iranian attacks to maintain the flow of oil. U.S. Treasury Secretary Scott Bessent claimed that new pipelines would make the strait a "worthless piece of water" within two years.