Houthis Put Yanbu Route Under Pressure

The Bab el-Mandeb strait, between Yemen and Djibouti, is only 29 kilometres wide. 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 through the corridor (Al Jazeera).

For Malta, this is not a distant Red Sea story. It is the route through which a shock in Gulf oil can travel into European fuel prices, aviation costs, freight rates and eventually the price of goods landing at the Freeport or being delivered to shops before the next festa weekend. No ship has to be sunk for the cost to rise. The threat itself becomes a charge on every barrel that insurers, shipowners and refiners decide is now riskier to move.

The timing hit Saudi Arabia's export system at its most exposed point. When the Strait of Hormuz, the narrow exit from the Persian Gulf, became too risky for commercial shipping, Saudi Aramco shifted supply to its fallback route: the East-West Pipeline, running from the eastern oil fields to Yanbu on the Red Sea coast. Aramco pushed that line to its maximum capacity of 7 million barrels per day (Arab News). Shipments from Yanbu rose to roughly 4 million barrels per day, up from about 973,000 a year earlier (Al Jazeera).

Saudi Arabia 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 busier target set in front of them (The Deep Dive).

How the cost moves north

The price moves in layers. Each layer can reach European fuel bills before a single barrel is actually missing.

The first layer is insurance. War-risk premiums, the extra charge ships pay to enter a conflict zone, roughly doubled after the blockade announcement, rising from 0.3% to around 0.75% of vessel value (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 each voyage and keeping tankers tied up for longer (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, Europe's benchmark oil price, had already reached $88.10 a barrel by 17 July, up 4.59%, before the formal blockade announcement added another risk premium (Investing.com).

The most exposed European fuel is jet fuel. In June, about 94% of jet fuel shipped from east of Suez to Europe passed through the Suez Canal system (Cyprus Shipping News). That matters for an island economy where air connectivity is part of the basic infrastructure, not a luxury. Eni chief Claudio Descalzi said the real weakness was in refined products: Italy had only 46 days of jet-fuel reserves, with stocks already down 8% in April (Corriere, Marketscreener).

Who pays, and what remains uncertain

Refiners buying cargoes at short notice feel the risk premium first. Airlines follow, because jet fuel is one of their largest operating costs and Europe's supply depends heavily on this corridor. Freight operators and farming sectors that rely on diesel come next. Consumers feel the effect later, because fuel taxes across Europe soften the link between crude prices and pump prices, while hedging contracts, advance deals that lock in fuel costs, give some companies temporary protection.

There is still a major caveat. 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 a confirmed closure (The National).

That is still enough to move prices. Insurers and shippers do not wait for a tanker to be hit before repricing danger. Every rerouted voyage, doubled premium and extra week at sea moves the surcharge up the chain, from shipping desks to refineries, then to airports, freight operators and passengers. Whether the Houthis can sustain the threat for weeks or months depends on military enforcement they have not yet demonstrated. The market has already started charging for the possibility.