For nearly three weeks, attacks on commercial vessels have almost closed the Strait of Hormuz to oil tankers, forcing countries to seek other shipping routes. One of the few alternatives is to divert oil shipments through the Red Sea.

Last week, Saudi Aramco, the Saudi Arabian oil and gas corporation, announced it would divert millions of barrels of crude oil, typically loaded onto ships in the Persian Gulf and transiting the Strait of Hormuz, to a pipeline leading to Yanbu port on the Red Sea. According to data firm Kpler, the number of daily oil loadings at this port in March more than doubled compared to last year's average.

However, this alternative shipping route now also faces risks. On 16/3, Iran declared US naval facilities in the Red Sea as "potential targets." "The presence of the US aircraft carrier Gerald R. Ford in the Red Sea is considered a threat to Iran. Therefore, the logistics centers and support services for this task force in the Red Sea are deemed potential targets," Iran's military command stated, as quoted by Fars news agency.

Location of the Red Sea and Middle Eastern countries. Graphics: AFP

Even before the conflict erupted on 28/2, the Red Sea was "not a geopolitically stable region," stated David Oxley, chief economist at Capital Economics.

In late 2023, Iran-backed Houthi forces attacked ships in this region to protest Israel's campaign against Hamas in the Gaza Strip. This instability forced many shipping companies to reroute around the Cape of Good Hope at the southern tip of Africa, adding several weeks to journeys and increasing costs for fuel, insurance, and crew wages.

The UK Maritime Trade Operations (UKMTO) warned that the current conflict, coupled with "the Houthi forces' hostile stance towards commercial vessels," has "significantly" increased the threat level in the Red Sea. "This group possesses the capability and has demonstrated the intent to conduct maritime attacks in the region," the agency stated.

Last week, an Israeli source also told CNN about the possibility of Houthi militants launching attacks. This has not occurred since the conflict began.

According to Saudi Aramco, if operating at maximum capacity, Saudi Arabia's pipeline can transport about 7 million barrels of oil daily. This volume can only compensate for nearly one-half of the 15 million barrels previously transported through the Strait of Hormuz.

Cargo ship transiting the Gulf of Suez, preparing to enter the Red Sea in 7/2023. Photo: Reuters

Analysts indicate that if the Red Sea also becomes unstable, these diverted oil flows could face further disruptions, exacerbating supply concerns and pushing prices higher. "If a Saudi oil tanker is attacked in the Red Sea, it signals to the market that every alternative shipping route is being targeted," commented Naveen Das, senior oil analyst at Kpler.

Oxley predicts that under this scenario, Brent crude prices could reach 130-150 USD per barrel, up from the current level around 100 USD. The longer oil prices remain high, the greater the ripple effect on the global economy, leading to increased consumer costs from airfares to food.

Conversely, container ships have been less affected, having avoided the area since late 2023. Peter Sand, chief analyst at shipping data firm Xeneta, estimates that about 90% of container shipping capacity that previously transited the Red Sea has rerouted to the Cape of Good Hope in South Africa.

In early January, Danish shipping company Maersk had announced the resumption of some voyages through the Red Sea, citing it as the "fastest, most sustainable, and most efficient" route between Asia and Europe. However, by early March, they suspended this route again due to risks in the Middle East.

Judah Levine, head of research at logistics company Freightos, stated that the current situation has completely pushed back the timeline for vessels to return to the Red Sea.

Peter Sand also predicts that many shipping companies are likely to avoid this area, as insurance costs for ships transiting this route have sharply increased since the outbreak of hostilities. "Although there have been no direct attacks from Houthi forces since the Middle East conflict began, the mere threat is enough to keep container ships away," he concluded.

Ha Thu (according to Reuters, CNN)