Riyadh rerouted around Hormuz through the Red Sea — what happens if that route closes too?

What happens if the Gulf’s last open sea route closes too? For the first time in the Iran war, both of Saudi Arabia’s saltwater exits are under threat at once. Yemen’s Houthis declared a naval blockade on Saudi Arabia on Monday, effective immediately, with military spokesman Yahya Saree naming the Kingdom directly and framing the move as an “eye for an eye” response to what the Houthis call a Saudi siege on Yemen. Hormuz to the east is already near a standstill — now Bab Al Mandab to the west is under a declared blockade too.

The threat lands at an exposed moment: Hormuz has been under an Iranian blockade since the war’s opening salvo in late February, and Saudi Arabia has been routing crude around it via its East-West pipeline to the Red Sea — the same route a Bab Al Mandab closure would cut off.

So what does this mean for shipping? Container lines, unlike the oil and bulk trades still moving through the strait, have had two years to prepare for this scenario — most rerouted around the Cape of Good Hope once Houthi attacks on Red Sea shipping began in late 2023. But that history says little about how thin the market’s cushion actually is against a new shock. We put that question to Lars Jensen, CEO of Vespucci Maritime.

EnterpriseAM: If Bab Al Mandab closes formally, how much does that actually change for container shipping — versus what it would do to the oil and bulk trades still transiting?

Lars Jensen: There are several nuances here. Almost all global carriers have gone around Africa, but CMA CGM — the third-largest — has kept several services running through the Red Sea for more than a year, and there’s a whole layer of smaller regional carriers serving mainly Asia-to-Red Sea cargo. A complete closure would severely impact that cargo. It’s a particular problem for Saudi Arabia, since Hormuz’s closure is already diverting a good portion of Saudi cargo out of the Gulf and into the Red Sea. If Bab Al Mandab shuts too, those niche carriers have only one option left — going around Africa as well — which would take a real bite out of available capacity.

EnterpriseAM: Does a further shock at this point mostly show up as cost and delay, or is there a point where it starts breaking things structurally?

LJ: Mostly cost. Additional diversions around Africa would soak up more capacity, and there’s no excess capacity in the system right now to absorb that.

EnterpriseAM: So where does this go from here — what’s the one indicator you’d tell a Gulf shipper or operator to watch, and does a threat like this move ins. markets before anything actually happens?

LJ: It comes down to whether there’s a diplomatic agreement Iran is actually happy with. Despite the posturing on both sides, we've seen clearly over the past five months that if Iran isn’t happy, it can close Hormuz again immediately — the same logic applies here.

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