Saudi is starting to reroute Asian energy shipments to Yanbu on the Red Sea, three insiders told Reuters, in a move that could elevate the port from a secondary terminal to a key east-west gateway. Rising costs tied to Hormuz — from higher ins. premiums to security risks — are forcing a major rethink of regional logistics, though the exact volume of supplies being shifted to Yanbu is still unclear.

Egypt has offered its Sumed pipeline — from Ain Sokhna to Sidi Kerir — to facilitate the transfer of Saudi crude from Yanbu to the Mediterranean, effectively creating a land-to-pipe bridge, a government source told EnterpriseAM. This would avoid potential ins. premiums associated with Red Sea sailings — a notable concern for commercial shipping as the threat of Houthi attacks on vessels has increased since hostilities began earlier this week.

“Don't expect the Suez Canal to recover for at least six months,” Arab Academy for Science, Technology, and Maritime Transport Vice President Mohamed Daoud tells EnterpriseAM. He explained that shipping agencies announce their schedules three to six months in advance, depending on the nature of each shipping line, and book cargo and ports accordingly. “Thus, even after the war ends, the impact will continue for at least six months until a different decision is made.”

Pakistan has urged the Kingdom to provide an alternative supply route for its petroleum, eyeing Yanbu as a potential solution. Saudi Arabia reaffirmed to Islamabad the security of its supplies through the channel during a meeting between Pakistan’s Petroleum Minister Ali Pervaiz Malik and Saudi Arabia’s ambassador to Pakistan, Nawaf Al Malki.

They aren’t wasting any time: The Pak-Arab Refinery Company (Parco) secured two 70k bblcrude oil cargoes via alternative routes that bypass the Strait of Hormuz. The first was transported through Saudi Arabia’s East-West Crude Oil Pipeline to Red Sea export terminals, while the second was loaded at Fujairah Port in the Gulf of Oman. By securing these routes, Parco — which handles 120k bbl / d — has extended its crude stock cover to 25 March, ensuring it remains at full operational capacity despite the regional bottleneck.

Why this matters

Major crude oil storage sites in the Kingdom are quickly filling up as Saudi’s key export route through the Strait of Hormuz remains closed to shipping, geospatial analytics company Kayrros Co-Founder Antoine Halff said. Four out of six tanks at the Ras Tanura refinery are already full, and the Ju’aymah terminal on the country’s east coast is “quickly running out of space,” he added.

It’s not just the Kingdom that’s struggling with limited oil storage, with other regional oil producers facing the same problem, Bloomberg reports, adding that they may soon be forced to cut output. JPMorgan Chase & Co has warned that Saudi and the UAE may have to slash production within weeks, following in the footsteps of Iraq — which paused oil production from its biggest field earlier this week.

The Kingdom has spent bns expanding its East-West pipeline and Yanbu South Terminal on the Red Sea. For operators, this is a stress test for Saudi’s land bridge ambitions. By bypassing Hormuz, Riyadh is attempting to insulate its trade flows from regional volatility while positioning the Red Sea coast as the more stable, cost-effective hub. If Yanbu can handle the surge, it could offer a way to decouple the GCC’s economy from the strait’s narrow chokepoint.

IN CONTEXT- Some regional suppliers declared force majeure — namely QatarEnergy and bunker suppliers in the UAE’s Fujairah, including Mediterranean Eastern Enterprise and Pearl Marine.

Not without hurdles

The Saudi East-West pipeline moves 5 mn bbl / d — far less than the 20 mn bbl / d that normallypass through Hormuz. It stands as the most viable alternative for the Kingdom at present, with overland corridors, such as the International North-South Transport Corridor, lacking the TEU capacity to absorb the diverted Suez traffic currently being handled by the Cape of Good Hope.

Could Egypt serve as a lifeline? While the Sumed pipeline has a 10k bbl / d capacity, it currently transports 5k bbl / d. “Sumed could provide a temporary solution,” petroleum expert and former head of the Egyptian Natural Gas Holding Company Medhat Youssef told EnterpriseAM.

Aramco currently has contracts running for the operation of the pipeline and owns several storage facilities, along with other unnamed companies. Sumed will “play a significant role in fulfilling contracts between Aramco and European countries by utilizing its capacity to reach the Mediterranean via the Sumed terminal to Sidi Kerir, and from there to ships at the ports of Alexandria and Dekheila,” he explained.

How much can Saudi’s pipeline really handle? While the East-West Pipeline has a standard nameplate capacity of 5 mn bbl / d, Aramco proved it could stretch this to 7 mn bbl / d when it temporarily expanded its capacity in 2019 amid tensions in the Gulf. The real question is whether pumping stations — many of which have been upgraded over the last decade — can maintain the 7 mn bbl / d throughput sustainably should the blockade of Hormuz last for months, rather than weeks.

It’s all a trade-off: The 7 mn bbl / d figure was a temporary sprint in which the Kingdom used NGL lines for crude — a logistical trade-off, as it reduces the Kingdom’s ability to move gas liquids to its petrochemical hubs and power plants.

If Saudi can’t hold 7 mn bbl / d, it will face a bottleneck — meaning only around a quarter of its total production would be able to safely bypass Hormuz. Asian buyers — the primary market for this crude — will have to weigh up the risk versus reward of this move.

The GCC’s supply issues aren’t limited to Hormuz — refineries and storage facilities are facing fire. This leaves a key issue: even if alternative supply routes are secured, as long as energy infrastructure is still at risk of attack, supply could be snagged or take a literal hit at any moment.

While petroleum logistics have a workaround, the same cannot be said for LNG — South Asia’s reliance on Qatari gas remains tethered to the strait, as Saudi Arabia lacks comparable Red Sea LNG export infrastructure.

What’s next

Easing away from a reliance on Hormuz? “I would consider this only a short-term solution until the conflict ends,” Equity Research Analyst at Gabelli Funds Jens Zimmermann told EnterpriseAM. That said, tensions always have the potential to flare up again. “I could imagine that Saudi could invest in building more pipeline capacity to the Red Sea. That would take time, but could be considered a ‘long-term solution’ to diversify its export channels,” Zimmermann added.

We’re watching out for Asian supply contracts. If China and India follow Pakistan’s lead, Saudi’s Red Sea initiative could become the most viable option to bypass Hormuz.

The disruption will hit Asian markets hardest, as they uptake 45.7% of their total crude load and 29.5% of their gasoline via the strait. Countries like Japan, China, and India — which rely on the Middle East for the vast majority of their crude — are facing immediate supply gaps as tankers are unable to exit the Gulf.

We’re waiting to hear more about the volume being funneled through the pipeline. This will indicate how reliant Saudi Aramco plans to be on its East-West Pipeline to feed this Red Sea pivot.

Background

The math for a Suez-Hormuz bypass is catastrophic for margins. Rerouting Indian or Gulf exports around the Cape of Good Hope adds 15-20 days to transit times — but the bigger shock is the war-risk premium, which has jumped from 0.025% to 0.5% of vessel value in just a matter of days. With Brent crude surging to USD 130 / bbl on Hormuz closure fears, the delivered cost of goods is no longer predictable — exporters who paid USD 300 for a container to Dubai are now starting at USD 1.2k.