Tensions Rise in the Red Sea Following Threats from Houthis

[Mexico City = Shim Young-jae, Correspondent] Amid the war in Iran, the shipping routes through the Strait of Hormuz have been affected, and now the Red Sea route, which has been used as an alternative export route for Saudi Arabian oil, is also being shaken. After the Houthi rebels in Yemen warned shipowners not to enter Saudi ports, some oil tankers have halted their routes or turned back, putting pressure on both the Strait of Hormuz and the Bab-el-Mandeb Strait, two key oil transport routes.

According to Bloomberg, on the 21st (local time), some oil tankers approaching the Yemeni waters stopped their operations before entering the Red Sea, while other vessels carrying Saudi oil turned north towards the Suez Canal. On the same day, a vessel attempting to pass through the Strait of Hormuz while turning off its satellite signals was attacked, leading to crew members abandoning the ship for two consecutive days.

The Red Sea Emerges as an Alternative Route Amid Houthi Threats

Bloomberg reports that the Houthi rebels sent emails to shipowners warning them not to dock at Saudi Arabian ports. Following this warning, some oil tankers halted their voyages before entering Yemeni waters, and some Saudi oil-laden vessels exited the Red Sea and turned back towards the Suez Canal.

However, not all vessels have stopped operations. Tracking data indicates that some oil tankers are still heading towards Yanbu, a Saudi port on the Red Sea. Some oil buyers in Asia are also reportedly maintaining their shipping plans.

The importance of the Red Sea route has significantly increased as the war in Iran escalates. Saudi Arabia is sending oil to the Red Sea coast of Yanbu through a cross-continental pipeline to export oil without passing through the Strait of Hormuz. According to Bloomberg, Saudi Arabia exported record levels of oil from the Red Sea terminal until the Houthis warned of transport blockades.

Routing oil through the Red Sea has been a key means of mitigating supply shocks caused by disruptions in the Strait of Hormuz. However, if the Houthi threats materialize, alternative routes for sending oil westward across the Arabian Peninsula may also be restricted.

Francisco Blanch, head of commodity and derivative research at Bank of America Securities, stated in an interview with Bloomberg TV that the Bab-el-Mandeb Strait could become "another bottleneck." He explained that one of the main routes that has alleviated the impact of the blockade of the Strait of Hormuz has been the route that bypasses to the opposite side of the Arabian Peninsula.

IEA Warns of Increasing Supply Uncertainty as Inventory Buffers Thin

The International Energy Agency (IEA) has warned that rising tensions in both the Strait of Hormuz and the Red Sea could worsen the stability of oil supplies.

IEA Secretary-General Fatih Birol told Bloomberg, "The escalation of hostile actions surrounding the Strait of Hormuz and regional energy infrastructure is raising concerns about supply stability and uncertainty in market outlooks." He added that threats to the Bab-el-Mandeb Strait, which has become increasingly important as an alternative route to the Strait of Hormuz, further amplify these concerns.

According to Bloomberg, international oil prices have risen by about 25% since July when the U.S. and Iran resumed attacks. Currently, the oil market is not facing an immediate supply shortage thanks to the Red Sea bypass exports and unofficial operations in the Strait of Hormuz, but if new transportation disruptions occur amid declining global oil inventories, price shocks could increase.

In the early stages of the war, the oil market absorbed supply shocks through Saudi Arabia's Red Sea bypass exports and the operations of some "dark tankers" passing through the Strait of Hormuz. Dark tankers refer to vessels that operate with their automatic identification systems and satellite signals turned off or maintain opaque location information.

However, recent attacks have targeted even these unofficial transports. According to Bloomberg, after a vessel passing through the Strait of Hormuz with its satellite signals turned off was attacked, crew members abandoned the ship for two consecutive days. A source familiar with oil transport in the Gulf region noted that while some short-distance round trips continue, the volume has decreased compared to before the attacks began.

The Joint Maritime Information Center, which shares information between Western navies and commercial vessels, reported to Bloomberg that recent attacks on tankers in the Oman region have influenced the actions of shipping companies, and traffic density in the Strait of Hormuz has significantly decreased.

Crew Members Offered Months of Wages as Risks Increase for Tankers in the Strait of Hormuz

As the risks of operating tankers through the Strait of Hormuz increase, the compensation demanded by crew members and shipowners is also rising rapidly.

Bloomberg reported that on the 20th, some crew members were offered months' worth of wages in exchange for passing through the Strait of Hormuz. As the likelihood of attacks increases, shipowners and charterers are raising risk allowances significantly to secure operational personnel.

With fewer vessels continuing to operate in the Strait of Hormuz, the remaining shipowners and charterers are facing concentrated risks. As the number of attacked vessels increases, both insurance and charter rates will rise, and the final transportation costs that oil buyers must bear may also increase.

Oil tankers managed by Greece's Dynacom Tankers Management also changed course in the Red Sea following the Houthi warning. According to Bloomberg, the company reported that three vessels were attacked in recent days, one of which is partially submerged in the middle of the Strait of Hormuz.

Some Chinese vessels also abandoned their entry into the Red Sea following the Houthi warning and turned back. However, some vessels continue to head towards Yanbu, so the future impact will depend on the risk tolerance levels of shipowners and oil trading companies.

Gulf Oil Port Operations Drop Sharply, Confirmed by Satellite Data

Bloomberg's analysis of Sentinel-1 satellite data shows that oil terminals in major oil-producing countries in the Persian Gulf are operating at significantly lower levels than before the war.

Compared to two months before the war, the number of vessels docking at oil loading terminals in Saudi Arabia, Kuwait, Iran, Iraq, and the United Arab Emirates has noticeably decreased. If the oil loading terminals remain empty for extended periods, the volume of oil leaving the Gulf region could also decrease.

However, Bloomberg noted that there is a possibility that oil-producing countries conducted loading during times when satellite imagery was not available. While it is difficult to fully ascertain actual export volumes based solely on satellite data, the overall low terminal operating rates indicate that the oil transport capacity in the Gulf region is not reaching normal levels.

Disruptions in oil transport are also occurring outside the Middle East. According to Bloomberg, Kazakhstan's Black Sea oil exports were halted on the 21st after shipping companies refused to enter the port following a series of vessel attacks.

If Red Sea Disruptions Materialize, Super Tanker Freight Rates Could Surge Further

If transport through the Red Sea is restricted, the already soaring tanker freight rates could rise even more.

Clarksons Securities analyzed in a report that if the flow of oil through the Red Sea is actually halted, it could stimulate an increase in freight rates in the super tanker market. Currently, the daily freight rate for super large crude carriers is nearing $200,000, indicating one of the strongest boom phases in tanker market history.

With the reduction in operations in the Strait of Hormuz leading to a shortage of vessel supply, if the Red Sea is classified as a dangerous route, shipowners are likely to demand higher risk allowances and freight rates. If oil must be routed over longer distances, the transportation period may lengthen, further reducing the number of available vessels.

The simultaneous pressure on the Red Sea and the Strait of Hormuz could worsen not only the volume of oil supplied but also the actual delivery speed and costs. Even if oil-producing countries maintain production, delays in securing tankers and choosing routes could result in exports reaching the market later than expected.

The current situation is fluid. While some oil tankers have turned back, other vessels continue to move towards Saudi ports on the Red Sea. However, if both the Strait of Hormuz and the Bab-el-Mandeb Strait are threatened simultaneously, the two key bypass mechanisms that have absorbed the oil market shocks from the Iranian war could be weakened at the same time.