Houthis Squeeze Saudi Oil Route

The Bab el-Mandeb strait is one of those places that rarely troubles European politics until it does. It sits between Yemen and Djibouti, only 29 kilometres wide, but in June it carried around 7.4 million barrels of oil per day, roughly 7% of global output (Straits Times). On 20 July, Yemen's Houthis declared a naval blockade against Saudi shipping in the corridor (Al Jazeera). The point for Europe is that no tanker has to be hit for the cost to travel north. The threat itself becomes a charge on every barrel that needs to pass through.

The move landed at the weakest point in Saudi Arabia's export workaround. When the Strait of Hormuz, the narrow exit from the Persian Gulf, became too risky for commercial shipping, Saudi Aramco leaned on its alternative: the East-West Pipeline, which moves crude from the eastern oil fields to Yanbu, a Red Sea port. Aramco pushed the line to its maximum capacity of 7 million barrels per day (Arab News). Shipments through Yanbu rose to roughly 4 million barrels per day, up from about 973,000 a year earlier (Al Jazeera).

Saudi Arabia had eased pressure at one chokepoint by concentrating traffic at another. The Houthis, who have attacked more than 100 vessels in the Red Sea since late 2023, now have a denser flow of shipping to threaten (The Deep Dive).

How the cost moves north

The cost reaches Europe in layers, and each layer can be felt before any physical shortage appears.

The first layer is insurance. War-risk premiums, the extra charge paid by ships entering a conflict zone, roughly doubled after the blockade announcement, rising from about 0.3% of vessel value to around 0.75% (BoE Report, Forbes). Ships avoiding the Red Sea must go around the Cape of Good Hope at Africa's southern tip, adding 10 to 20 days to a voyage and tying up tankers that would otherwise be available for other cargoes (Interactive Brokers).

The second layer is refining. Northwest European gasoline refining margins, the gap between what refiners pay for crude and what they earn selling fuel, climbed close to a four-year high of roughly $44.43 per barrel (Investing.nl). Brent crude, the European benchmark oil price, had already reached $88.10 a barrel by 17 July, up 4.59%, as regional tensions built before the formal blockade added another layer of risk (Investing.com).

The most exposed European market is jet fuel. In June, about 94% of jet fuel shipped from east of Suez to Europe moved through the Suez Canal system (Cyprus Shipping News). That leaves European aviation heavily dependent on one corridor. Eni chief Claudio Descalzi warned that the real vulnerability was in refined products: Italy had just 46 days of jet-fuel reserves, with stocks already down 8% in April (Corriere, Marketscreener).

Who pays, and what remains uncertain

The first bill lands with refiners buying cargoes at short notice. Airlines are next, because jet fuel is one of their largest operating costs and European supply relies so heavily on this route. Diesel-dependent freight and farming sectors follow. Consumers meet the effect last, softened for a time by fuel taxes that dampen movements at the pump and by hedging contracts, which are advance deals that lock in fuel prices.

There is still a large unknown. No independent source has confirmed that the blockade is being physically enforced. Vessel-tracking data showed no clear fall in traffic through mid-July (The Deep Dive, TankerMap). Saudi crude loadings through the area did fall 36% over two weeks, but that points to commercial caution, with shippers choosing different routes, rather than proof of an enforced closure (The National).

That is why the blockade matters even if no tanker is intercepted. Shipping desks, insurers and refiners are already behaving as though the risk is real. Every rerouted voyage, doubled premium and extra week at sea becomes a surcharge that moves from tankers to refineries, then on to airports, hauliers and passengers. Whether the Houthis can sustain the pressure over weeks or months depends on military enforcement they have not yet demonstrated. The price effect has already arrived.