If Saudi Arabia's "Plan B" Yanbu Port and Bab-el-Mandeb Strait also fail, will oil prices rise by another $20?

If Saudi Arabia's "Plan B" Yanbu Port and Bab-el-Mandeb Strait also fail, will oil prices rise by another $20?

When Saudi Arabia shifted its crude oil export focus to the Red Sea in order to avoid risks in the Strait of Hormuz, this so-called "safe passage" itself is becoming a new storm center.

According to Wind Trading Desk, JPMorgan's March 29 oil market briefing pointed out that the Yemeni Houthi armed group has officially joined the Middle East conflict, fundamentally changing the risk landscape of global crude oil supply chains. Previously, the market focused on the Strait of Hormuz, but now the Red Sea and the Bab-el-Mandeb Strait are simultaneously exposed to the threat of war, and risks are now superimposed on both lines.

Saudi Arabia's "detour plan" meant to circumvent the Hormuz Strait—an alternative export route centered on Yanbu port—is facing a severe blow, with approximately 4.8 million barrels per day of bypass capacity in jeopardy. The report estimates that if key nodes are damaged, oil prices may rise by another $20 per barrel.

Conflict Map Expands: From Single Chokepoint to Dual-Line Blockade

Previously, Middle East conflicts were mainly concentrated around the Persian Gulf and the Strait of Hormuz. With the formal involvement of the Houthi forces, the geopolitical front line has significantly extended.

The geographical significance of this change is particularly key: The two most important corridors for global energy trade—the Strait of Hormuz and the Bab-el-Mandeb—are now both exposed to potential threats. Both are strategic chokepoints that are difficult to bypass; any blockages to either will trigger systemic supply chain shocks. If both are pressured simultaneously, "detour options" are greatly reduced, and supply elasticity drops sharply.

The Houthi armed forces' attack capabilities mainly cover the following targets, which collectively constitute the key nodes of Saudi Red Sea exports—crude oil and oil products exported from Yanbu and Rabigh ports must pass through the Bab-el-Mandeb Strait to reach the Asian market:

  • Yanbu port: The Red Sea terminal for the Petroline East-West pipeline, integrating pipeline terminal and port functions, is Saudi Arabia's primary alternative crude oil export port.
  • Bab-el-Mandeb commercial shipping: The only navigable route at the southern end of the Red Sea.
  • Rabigh port: Approximately 200,000 barrels per day of oil product exports, also within potential strike range.

Saudi Arabia's Detour Logic Is Being Undermined

The core of understanding this risk lies in clarifying the "Hormuz alternative route" Saudi Arabia previously constructed and the current structural vulnerability it faces.

With tensions continuing in the Strait of Hormuz, Saudi Arabia has massively shifted its crude oil export focus to the Red Sea route. Data shows that crude exports via Yanbu have soared from about 750,000 barrels/day to 4.3 million barrels/day, with an additional potential of about 500,000 barrels/day transferred, totaling nearly 4.8 million barrels/day of Red Sea export capacity now exposed to high risk. To support this shift, Saudi Arabia has deployed nearly 50 VLCCs (Very Large Crude Carriers) in the Red Sea, several of which are berthed or awaiting berth—forming a highly concentrated and conspicuous fleet.

The key issue is this: when Saudi Arabia shifted oil to the Red Sea to avoid Hormuz risk, the Houthi intervention has made this "safe alternate route" itself a source of risk.

Limited Alternatives, Significant Logistical Bottlenecks

If the Bab-el-Mandeb Strait is effectively blocked, Yanbu’s daily 4.8 million barrels of crude exports will be forced to reroute northward, relying on the Suez Canal and SUMED pipeline. Regarding the carrying capacity of this backup route, calculations show:

  • SUMED pipeline: Connects Red Sea’s Ain Sukhna and Mediterranean’s Sidi Kerir, theoretical maximum capacity is 2.8 million barrels/day, but actual operation is usually only about 1 million barrels/day. Even at full capacity, it cannot absorb all of the 4.8 million barrel shortfall.
  • Suez Canal: The remaining 2—2.2 million barrels/day must pass via the Canal. However, Saudi crude exports rely heavily on VLCCs, which can only carry partial loads when passing the Canal, meaning voyages must be increased greatly or smaller ship types used—both would push up transport costs and delay deliveries.

Detour times are significantly longer. If unable to exit the Red Sea directly via Bab-el-Mandeb, round-trip journeys to the Asian market would be extended by about 40 days and require over 130 additional tanker voyages to maintain normal shipments of 4.8 million barrels/day.

Oil Price Shock: May Rise Another $20 Per Barrel

If the estimated 5 million barrels/day of Saudi detour capacity faces real threats, the bank calculates it could bring pricing pressure of $20 per barrel. This increase corresponds to a scenario where detour capacity is forced offline and supply cannot be supplemented in a timely manner through alternative paths.

Of note, this $20 upside risk is not based on the assumption of Iran’s complete export stoppage, but is only focused on Saudi Arabia’s Red Sea export disruption—a relatively local shock—demonstrating that the current risk magnitude should not be underestimated.

Upgrading is Only a Matter of Time?

Will the Houthi armed forces choose to directly strike Saudi infrastructure and shipping routes, or keep this capability as a strategic bargaining chip to use flexibly as conflicts evolve?

Analysis says, the question has shifted from "whether" escalation will happen to "when" it will happen. As the conflict might extend toward Iran (including larger GCC involvement, attacks on Iranian infrastructure, or even possible ground operations), with each passing day, the risk of escalation accumulates.

For energy market investors, this means the current geopolitical risk premium may still be underpriced, and the value of hedging tail risks of oil price upside is significantly increasing. The allocation logic for the energy sector, as well as supply chain safety reviews for global shipping and refining companies, all need to be reassessed within this framework.

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The above content comes from Wind Trading Desk.

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