For weeks, oil tankers had been finding ways around the mess in the Middle East. The Iran war made the Strait of Hormuz a dangerous place to sail. So shippers leaned harder on the Red Sea and the Bab el-Mandeb Strait as a workaround. Saudi Arabia also used a pipeline circumventing the Strait of Hormuz to shift a large portion of its crude, and in the period leading up to the Houthi threat to halt its shipments, it shipped unprecedented amounts of oil from Red Sea terminals.
That workaround now looks shaky. An email from the Houthi rebel group warned shipowners against docking at Saudi Arabian ports. Within a short time, several oil carriers seemed to halt their trips near Yemen's waters entering the Red Sea, while others carrying Saudi crude reversed course and headed north toward the Suez Canal. Additionally, a crude carrier operated by Greece's Dynacom Tankers Management changed its route.
At the same time, the Strait of Hormuz remains under pressure. Three vessels managed by Dynacom have been hit in recent days. One vessel is half-sunk at the center of the Hormuz waterway. Yet another ship had its crew desert it in the strait for the second day in a row, as it tried to transit with its satellite tracking switched off.
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"Recent attacks on tankers in Omani waters further influenced operator behavior and contributed to significantly reduced traffic density," the Joint Maritime Information Center said on Tuesday.
Two critical chokepoints are now under threat at once. The International Energy Agency's Executive Director Fatih Birol put it plainly: "The escalation in hostilities affecting the Strait of Hormuz and energy infrastructure in the region increases security of supply concerns and uncertainty over the market outlook. Threats to the Bab el-Mandeb Strait, which has become increasingly important as a route to bypass the Strait of Hormuz, exacerbate these concerns further."
Should Red Sea transit be interrupted, freight rates in the already booming supertanker sector would probably rise further, according to analysts at Clarksons Securities. The tanker sector is experiencing one of its strongest upswings on record, with the biggest vessels now making almost $200,000 per day.
According to Francisco Blanch, who leads commodities and derivatives research at BofA Securities, in a Bloomberg TV interview: "It'll be another chokepoint. One of the big relief valves for this Hormuz shutdown has been rerouting through the other end of the Arabian peninsula."
For now, a limited number of vessels are still moving through the Strait of Hormuz, although traffic has dropped significantly from pre-attack levels. Executives in the oil tanker sector noted that shipping firms had grown more wary of docking at Saudi Arabia's Red Sea port of Yanbu, but it remains unclear whether that will affect charter rates and cargo volumes.
A few ships were still heading for Yanbu in spite of the warnings, indicating that the ultimate effect hinges on how much risk the owners and traders are willing to accept.
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