Disruptions around the Strait of Hormuz and Bab El-Mandeb are changing risk levels for Saudi crude exports and the ability to reroute cargoes. Up to 16–17m b/d of crude flow through Hormuz has been halted, and about 7m b/d of that can bypass the strait. Saudi Arabia has about 5–5.5m b/d of spare bypass capacity versus pre-war levels on the East-West pipeline, allowing exports via the Red Sea. The East-West pipeline appears to be running at full capacity, while Yanbu ports show 13m b/d of scheduled crude loadings for export this week and over 5m b/d next week.

Yanbu Export Exposure To Red Sea Risk

Based on schedules, around 70–75% of Yanbu exports could face disruption if Houthi activity affects the Red Sea. Of Yanbu exports, 90% are set to load on VLCCs, and at least 80% of that is expected to go to Asian markets or the Saudi Jazan refinery. Fully laden VLCCs cannot use the Suez Canal, which points to Bab El-Mandeb transit for many cargoes. Up to 2–2.5m b/d of scheduled VLCC flows could instead go north to Ain Sukhna and use the 2.5–2.8m b/d SUMED pipeline to Sidi Kerir, with just over 2m b/d seen as the upper limit for this route. Given the massive disruption in the Strait of Hormuz, the market is facing a severe supply shock that rerouting cannot fully solve. With the Saudi East-West pipeline to the Red Sea now operating at its limit, we see a clear bullish case for crude oil in the immediate future. This situation is a significant escalation from the shipping delays we observed through 2024 and 2025. The risk to this rerouted oil is not theoretical, as it now must pass through the Bab el-Mandeb strait. We saw Brent crude prices jump over $115 per barrel after the reported missile near-miss of a VLCC in that waterway last month. The CBOE Crude Oil Volatility Index (OVX) remains elevated near 55, reflecting the market’s anxiety over a potential direct hit on a tanker.

Trading And Market Implications

A huge portion of these exports, up to 75% of the flow from Yanbu, is loaded onto VLCCs that are too large to transit the Suez Canal. This forces them south through the high-risk zone to reach Asian markets. The alternative path using Egypt’s SUMED pipeline is already strained and can only handle a maximum of about 2.5 million barrels per day, leaving a significant bottleneck. For traders, this implies a strategy of buying call options on front-month Brent futures to capitalize on price spikes while defining risk. The spread between Brent and WTI crude has already widened to nearly $9, the largest gap since late 2024, as the disruption is most acute for Middle Eastern barrels. We believe this spread is likely to widen further in the coming weeks. The market structure strongly supports this view, with the futures curve in a steep backwardation, signaling an immediate and severe shortage of supply. This premium on near-term contracts suggests that holding long positions in May or June 2026 contracts is the most direct way to trade this tightness. This is reminiscent of, but more sustained than, the price action we witnessed after the Saudi facility attacks back in 2019. Create your live VT Markets account and start trading now.

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