Saudi Oil Exports Plunge as Red Sea Risks Skyrocket

Saudi Arabia's oil export costs have surged due to increased risks in the Red Sea, making it as expensive for tankers to pass through this route as the Strait of Hormuz. The war-risk insurance premium for Saudi-linked tankers calling at the Red Sea port of Yanbu has tripled to around 3% of a vessel's value from less than 1% in early July, according to Reuters.

The costs add millions of dollars to every cargo. A voyage from Yanbu can carry roughly $3 million in war-risk insurance, while ports farther south or through Hormuz can reach up to $7 million, compared with at least $100,000 before the war.

Saudi Arabia built the East-West pipeline specifically to avoid relying on Hormuz, but recent drone attacks shut the pipeline. Aramco has since restarted it at reduced rates, although Yanbu crude loadings had still not resumed as of Thursday.

The Red Sea route also faces threats from the Houthis, who have warned Saudi-linked vessels around Bab el-Mandeb. Shipping companies see a practical difference between the two chokepoints due to U.S. forces providing some aerial support around Hormuz but no comparable protection in the Red Sea.