Saudi Arabia's Red Sea Bottleneck Threatens Global Oil Markets

Saudi Arabia's reliance on the East-West Pipeline to transport oil to the Red Sea has been exposed as a critical weakness due to the Houthi blockade in Bab El Mandab.

The pipeline, which was seen as a strategic solution to disruptions in the Strait of Hormuz, is not solving the problem entirely. Even when crude reaches Yanbu on the Red Sea, it still needs to leave the area. The blockade has made this process increasingly difficult.

Markets had previously seen Saudi Arabia's reliance on the East-West Pipeline as a reassuring measure to strengthen energy security and reduce dependence on Hormuz. However, the current situation in Bab El Mandab highlights the need for policymakers and strategic planners to reassess alternative routes and diversify export infrastructure.

The Suez Canal remains an option, but it has its own limitations. The canal's draft restrictions mean that fully loaded VLCCs cannot transit the Suez Canal at full cargo capacity. Egypt's SUMED pipeline is also not equipped to handle a sudden diversion of several million barrels per day from Yanbu.

The consequences of a closure or disruption in Bab El Mandab will be severe, with congestion and demurrage expected in Ain Sokhna and Sidi Kerir. The Suez Canal itself will become a bottleneck, as every vessel requires pilots, tug support, traffic management, and scheduled convoy slots.