Houthis Blockade Red Sea as Saudi Arabia Reroutes Oil

The Houthis have declared a naval blockade of Saudi Arabian shipping in the Bab al-Mandab strait and the southern Red Sea, launching missile and drone strikes against oil tankers and infrastructure. This escalation follows a broader regional conflict involving the United States, Israel, and Iran, which has seen the Strait of Hormuz effectively closed. Transit through Hormuz dropped approximately 95% after a July ceasefire collapsed, pushing Saudi Arabia to reroute up to 7 million barrels of crude per day through the Red Sea.

To bypass the Houthi blockade, Saudi Arabia is redirecting oil from the port of Yanbu to Egypt's Ain Sukhna port, transporting it via the SUMED pipeline to the port of Sidi Kerir. From there, tankers must travel around Africa via the Cape of Good Hope to reach Asia, extending journeys by a month. In response to these disruptions, a Saudi-led military coalition launched airstrikes inside Yemen.

Saudi Aramco is considering price hikes of up to $5 per barrel to offset transportation costs, while state-run refiners in India are demanding discounts of $5 to $10 per barrel to cover the higher freight costs. Asian nations, including Japan and South Korea, have implemented fuel subsidies and increased purchases of Russian crude to stabilize supplies. Meanwhile, President Donald Trump has signaled a return to negotiations to end the war with Iran, following a U.S. interception of an Iranian attack on military bases on July 28.