Oil above $100: Red Sea threat could add month to Asia shipments

Dubai: Oil shipments to Asia could take about a month longer if escalating fighting around the Red Sea forces more tankers to avoid one of the world’s most important maritime chokepoints.

The threat comes as Iran-backed Houthi militants tighten their grip around the Bab Al Mandab Strait, the narrow gateway connecting the Red Sea with the Gulf of Aden and the Indian Ocean.

The Houthis have captured the Yemeni port city of Mocha and, according to Yemeni government sources cited by CNN, strategic Perim Island in the middle of the chokepoint.

That matters far beyond Yemen.

Since the US-Iran war severely restricted shipping through the Strait of Hormuz, the Red Sea has become an increasingly important alternative route for getting Middle East crude to global markets.

But if tankers cannot safely travel south through Bab Al Mandab, cargoes bound for Asia face an extraordinary detour.

Ships may have to travel north through the Suez Canal into the Mediterranean, sail down the western coast of Africa, round the continent and then cross the Indian Ocean towards Asian customers.

The journey could add around a month to transit times while increasing spending on fuel, freight, insurance and crews.

The numbers behind the oil squeeze

• 20 million barrels/day: Oil that passed through the Strait of Hormuz before the war — about one-fifth of global supply.

• 4.5 million barrels/day: Crude exported from Saudi Arabia’s Yanbu Red Sea terminal at its peak after supplies were rerouted.

• 3 million barrels/day: Amount of that crude that was travelling south through Bab al-Mandab towards global markets.

• 400,000 barrels/day: Saudi crude flow through Bab al-Mandab by August as the Houthi threat intensified.

• About 1 month: Extra transit time some Asia-bound cargoes could face if forced to take the long route around Africa.

• 60–70%: Estimated decline in vessel transits through Bab Al Mandab since shipping companies began avoiding the route.

• 46%: Further fall in transits during the latest escalation.

• Above $109: Brent crude’s Thursday peak before easing to around $104 on Friday.

From lifeline to another chokepoint

Before the war, roughly 20 million barrels of oil passed through the Strait of Hormuz each day — around a fifth of global supply.

When traffic through Hormuz was severely curtailed, Saudi Arabia increasingly moved crude through its East-West Pipeline to the Red Sea port of Yanbu.

At its peak, around 4.5 million barrels a day were being exported from Yanbu, according to Richard Bronze, co-founder of Energy Aspects.

About 3 million barrels a day then travelled south through Bab Al Mandab.

But that flow has already fallen dramatically.

Saudi crude passing through Bab Al Mandab dropped to around 400,000 barrels a day in August because of the Houthi threat and has since fallen further, Bronze told CNN.

The Houthis’ latest advances therefore threaten a route that had become an important pressure valve for oil exports after the disruption at Hormuz.

“The Bab Al Mandeb had been a lifeline,” Bronze told CNN, describing the growing threat to that route as a wake-up call for the oil market.

Asian refiners look elsewhere

For Asia, the problem is not simply that journeys could become longer.

Refineries need reliable supplies of crude, and uncertainty over Middle East shipments is already prompting some buyers to seek barrels elsewhere.

Asian refiners have been searching for alternatives and bidding up cargoes from other regions, Bronze said, contributing to the sharp rise in crude prices.

That competition matters because Asia is the destination for a large share of Middle East oil exports.

The disruption can therefore spread well beyond the tankers actually sailing through the Red Sea.

If buyers compete more aggressively for alternative supplies, the price of those barrels can rise too.

Oil back above $100

Markets have already reacted sharply to the deterioration in shipping security.

Brent crude surged above $109 a barrel on Thursday before easing to around $104 on Friday — still its highest level since July.

The Houthi advances are not the only reason prices have climbed.

Analysts point to a combination of Red Sea disruption, production cuts and attacks on other energy infrastructure.

But the tightening squeeze on two crucial waterways has added another layer of uncertainty to a market already struggling with reduced supplies.

Shipping traffic through Bab Al Mandab was already well below historical levels following earlier Houthi attacks.

Xeneta chief analyst Peter Sand estimates vessel transits have fallen by between 60 and 70 per cent since shipping companies began diverting vessels away from the Red Sea in late 2023.

Transits have dropped another 46 per cent in recent days amid the latest fighting.

More than an oil problem

The consequences could eventually reach consumers far from the Middle East.

Longer voyages mean ships consume more fuel and remain occupied for longer, reducing available tanker capacity and pushing freight costs higher.

Higher crude prices also feed into diesel, petrol, aviation fuel and other products.

US diesel prices, for example, have risen more than 50 per cent since the Iran war began and topped $6 a gallon on Friday for the first time, according to AAA data cited by CNN.

The danger is therefore not simply that one shipping route could become harder to use.

It is that the alternative created when Hormuz was squeezed is itself becoming increasingly risky — forcing oil to travel farther, take longer and cost more to reach the economies that depend on it.