Growing Houthi risk could amplify inefficiencies across tanker trade flows

Escalating Houthi attacks against Israeli targets signal potential maritime sabotage ahead, threatening to reshape global tanker trade flows and introduce significant inefficiencies into an already strained supply chain. We analyse how redirecting crude exports via the Cape of Good Hope could nearly triple tonne-miles out of Yanbu, favor specific tanker benchmarks, and shift clean product trades in unexpected directions.

Overview of the current situation

On March 28, Yemen's Houthis announced the launch of ballistic missiles against Israeli infrastructure - marking the one-month anniversary of heightened US-Iran tensions. While attacks have remained confined to onshore targets, this escalation foreshadows a potential return to commercial shipping sabotage across the Red Sea and the Bab-el-Mandeb (BeM) Strait. Our analysis uses Kpler vessel and cargo-tracking data to quantify rerouting and tonne-mile impacts.

Key terms to understand

Key takeaways

• Houthi attacks currently target Israeli infrastructure rather than commercial shipping, yet military pressure on Iran could trigger renewed maritime sabotage.
• Redirecting Yanbu crude exports via the COGH would nearly triple tonne-miles, favoring Suezmaxes and Atlantic VLCC benchmarks.
• Unlike the 2024 East-to-West LR2 boost, current support stems from West-to-East trades, and from shifting UK/Continent MR volumes toward LR2s.

Impact on crude trades

Control over the BeM has become increasingly important for crude trades since the onset of regional conflict. The de facto closure of the Strait of Hormuz (SoH) forced Saudi Arabia to redirect exports to the Red Sea via the East-West pipeline. Exports rose to 4.6 million barrels per day (Mbd) in the second fortnight of March versus approximately 760 kbd over 2025.

Shifting route preferences

While SoH transits have dominated market attention, friction in BeM routing emerged earlier in the conflict. This pattern appears most clearly in UK/Continent (excluding Russia) trades to East of Suez markets:

• Following the November ceasefire between Israel and Hamas, flows briefly resumed via the Suez Canal.
• By March, the Cape of Good Hope re-emerged as the preferred route.
• At least 60% of underway volumes now opt for the longer COGH routing.
• Affected grades include CPC, BTC, and Forties.

The Houthis' recent involvement should sustain COGH as the preferred routing for these trades, supporting TD6 and TD19 benchmarks.

Potential disruption scenarios

Should commercial shipping become a target in the BeM - whether by Houthis or Iran directly - we anticipate the following consequences:

Logistical challenges under disruption

A full BeM disruption would force Saudi Arabia's output westward via the Suez Canal and around the COGH to serve Asian buyers. This creates substantial inefficiencies:

1. Cargo downsizing: Vessels would need to shift from VLCCs to Suezmaxes, or operate VLCCs at partial loads to comply with Suez draft limits.
2. Loading optimisation: Yanbu terminal operations would require restructuring to optimise loadings of smaller or partially loaded vessels.
3. Suez congestion management: Increased traffic through the canal would create bottlenecks.
4. Shuttle trade development: Market economics may support shuttle services beyond the Suez Canal, followed by reverse lightering in the Mediterranean.
5. Increased ballast legs: More empty return voyages would amplify demand dynamics.

Market rebalancing effects

In a more realistic approach, flows to the East will be tempered by freight economics. European refiners would likely capture a higher share of Red Sea barrels, freeing Atlantic output for Asian markets. This shift would promote Atlantic VLCC benchmarks (TD15/TD22) at the expense of transatlantic midsizes (TD25, TD27).

History demonstrates that a portion of the shipping community remains risk-tolerant. Some operators may continue BeM transits while engaging in dark activity - operating with transponders disabled to avoid detection.

Impact on clean petroleum product trades

Clean petroleum product (CPP) trades present a different picture than crude markets. Red Sea CPP output continues to flow overwhelmingly westward, reducing the volume requiring rerouting via Africa.

Regional exposure to freight increases

Following the loss of Middle East Gulf (MEG) volumes, Eastern Asia and Southeast Asia have increasingly relied on Saudi CPP supplies from the Red Sea. This exposes two already disproportionately affected regions to higher freight costs.

Shifting tanker segment dynamics

Back in 2024, LR2 clean trades emerged as the main beneficiaries of the Red Sea crisis, as East-to-West trades shifted to significantly longer COGH hauls, boosting demand for larger vessels.

A similar uplift in tonne-miles for this specific route appears unlikely in a fresh disruption scenario. Several factors have curtailed westward flows:

• Loss of MEG CPP exports.
• Downward adjustment in crude processing capacity in the East.
• Rising protectionism in origin markets.
• Volumes dropped to 90 kbd thus far in March versus an average of 950 kbd over 2025.

West-to-East trades take the lead

This time, we see LR2 freight increases driven by West-to-East trades:

• Algerian naphtha surge: A significant increase in Algeria's naphtha exports to the East on LR2s supports demand.
• UK/Continent to East Africa/Asia flows: The SoH crisis has boosted trade flows on MRs.
• Upsizing pressure: If Suez transits become restricted, MR cargoes would likely shift to LR2s.
• TC15 benchmark support: These dynamics particularly strengthen TC15 assessments.

Future implications and market outlook

The current situation presents multiple pathways, each with distinct implications for tanker markets and global supply chains.

Near-term scenarios

Scenario 1: Status quo maintained

• Houthi attacks remain confined to onshore Israeli targets.
• Commercial shipping continues with elevated risk premiums.
• COGH routing preferences persist for UK/Continent to Asia trades.

Scenario 2: Renewed maritime sabotage

• Military pressure on Iran triggers Houthi (or Iranian) attacks on commercial vessels.
• BeM transits become untenable for most operators.
• Tonne-miles surge as virtually all traffic reroutes via COGH.
• Suezmax and Atlantic VLCC benchmarks strengthen significantly.

Scenario 3: Regional de-escalation

• Diplomatic progress reduces tensions.
• Gradual return to BeM transits.
• Rate premiums normalise over 6–12 months.

Structural market changes

Regardless of near-term outcomes, several structural changes appear likely to persist:

• Increased tanker demand: Longer voyage distances support higher utilisation rates.
• Vessel class preferences: Suezmaxes gain relative importance for Red Sea-origin trades.
• Regional supply chain adjustments: Asian refiners diversify sourcing away from chokepoint-dependent routes.
• Risk premium normalisation: Elevated war risk insurance costs become embedded in freight calculations.

Frequently asked questions

What are the potential risks for commercial shipping?

Commercial vessels face multiple risks in the current environment. Direct attack by Houthi missiles or drones represents the most acute threat. War risk insurance premiums have increased substantially for Red Sea and BeM transits. Operators must also consider reputational risks and crew safety concerns when routing through contested waters.

How might these attacks affect global oil prices?

Disruptions to BeM transits would not directly reduce global oil supply - Saudi Arabia can redirect exports via alternative routes. However, increased transportation costs and longer voyage times would likely translate into higher delivered crude prices for Asian buyers. European refiners might benefit from improved access to Red Sea barrels, potentially narrowing regional price differentials.

Which tanker segments benefit most from continued disruption?

Suezmaxes and Atlantic-based VLCCs stand to gain the most from sustained BeM disruption. For clean products, LR2s benefit from West-to-East trade growth and upsizing from MR cargoes. Transatlantic midsize vessels (Aframaxes) may see relative weakness as Atlantic crude flows increasingly head eastward.

How long could these disruptions persist?

Historical precedent suggests maritime security concerns can persist for extended periods. The previous Houthi campaign against Red Sea shipping lasted over 12 months before the November 2024 ceasefire. Current geopolitical dynamics - particularly US-Iran tensions - suggest elevated risk could continue through 2025 and potentially beyond.

Conclusion

Growing Houthi risk introduces another layer of uncertainty into global tanker trade flows. While attacks currently target Israeli infrastructure rather than commercial shipping, the potential for maritime sabotage remains elevated. Market participants should prepare for scenarios where BeM transits become restricted, nearly tripling tonne-miles for Red Sea crude exports and shifting clean product trades in unexpected directions.

The beneficiaries of continued disruption appear clear: Suezmaxes, Atlantic VLCC benchmarks, and LR2s supporting West-to-East trades. Transatlantic midsizes and traditional MEG-to-West clean product routes face relative headwinds.

We continue to monitor these developments closely, providing commodity market intelligence to help our clients navigate an increasingly complex geopolitical landscape. Kpler's vessel and cargo-tracking platform provides near-real-time visibility to help clients assess rerouting, tonne-mile impacts, and rate shifts.

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