Saudi Arabia has proposed an international maritime coalition to protect commercial routes across the Red Sea, the Bab el-Mandeb Strait and the Gulf of Aden. The first round of consultations took place in Riyadh on 30 July, with representatives from 43 countries reportedly participating.
The initiative follows attacks on vessels connected with Saudi Arabia and growing concerns about further restrictions on oil transportation. For energy markets, the development highlights a broader issue. Oil may be produced, purchased and contracted, yet its delivery can still become slower, more expensive and less predictable.
A Critical Route for Global Trade
The Bab el-Mandeb Strait connects the Red Sea with the Gulf of Aden and the Indian Ocean. It also provides access to the Suez Canal, making it one of the principal trade routes between Asia, the Middle East and Europe.
The corridor has particular importance for Saudi Arabia. The country’s western port of Yanbu provides an alternative export outlet when transportation through the Strait of Hormuz faces pressure.
Around 20 million barrels of oil and petroleum products passed through Hormuz each day in 2024. This represented approximately one-fifth of global liquid fuel consumption. Saudi Arabia accounted for about 38% of crude oil and condensate transported through the strait.
To reduce its dependence on this route, the country operates the East–West pipeline. The system connects production facilities in eastern Saudi Arabia with Yanbu on the Red Sea coast. Its standard capacity is approximately 5 million barrels per day, while previous infrastructure adjustments temporarily increased capacity to 7 million barrels per day.
However, redirecting oil to Yanbu does not remove maritime risk. Tankers leaving the Red Sea must still pass through Bab el-Mandeb. A route designed to reduce exposure to one strategic passage therefore depends on the security of another.
Logistics Are Driving the Risk Premium
Oil prices do not rise only when production falls. They can also increase when transportation becomes more difficult.
Higher insurance premiums, increased freight rates, vessel delays and longer alternative routes all affect the final cost of a barrel. Buyers may also need to maintain larger inventories and reserve shipping capacity earlier than usual.
At the end of July, Brent crude briefly moved above $100 per barrel before declining to approximately $89.03. US crude fell to about $83.59. The correction suggested that traders did not expect an immediate and complete interruption. Nevertheless, the volatility demonstrated how quickly maritime uncertainty can influence market expectations.
Asian importers are especially exposed. In 2024, approximately 84% of the crude oil and condensate transported through Hormuz was directed to Asia. China, India, Japan and South Korea were among the largest recipients.
If both Gulf and Red Sea routes become less reliable, Asian refiners may need to diversify purchases, revise delivery schedules and increase strategic inventories. Such changes can be expensive because refineries are often configured to process specific grades of crude oil.
Different Consequences Across the Market
Import-dependent economies are likely to face the most immediate pressure. Their costs may rise through more expensive crude oil, higher freight charges, insurance premiums and additional storage requirements. In countries where fuel prices quickly affect consumer prices, transportation disruptions can also strengthen inflation.
Saudi Arabia faces a different challenge. Higher oil prices may support government revenue, but unreliable exports could weaken the country’s reputation as a stable supplier. Delivery certainty is particularly important when the government is financing large infrastructure and economic diversification programmes.
Alternative exporters may gain opportunities. Producers in the Atlantic Basin, Africa, the United States and Latin America could attract buyers seeking routes perceived as more secure. Shipping companies capable of operating in high-risk areas may also benefit from stronger freight rates, although their insurance and operational costs would rise.
Petroleum products may be even more sensitive than crude oil. Higher transportation costs for diesel, aviation fuel and petrol can reach consumers rapidly. Refining markets were already relatively tight, meaning disruption could affect fuel prices before any major shortage of crude oil appears.
What the Coalition Can Achieve
A maritime coalition could improve surveillance, intelligence sharing and vessel protection. It may also increase confidence among shipowners and insurers.
However, markets will focus on practical details. These include the number of countries deploying operational resources, the availability of escorts, the division of responsibility and the speed at which insurance conditions change.
Three broad outcomes are possible. Effective protection could reduce attacks and gradually lower the oil risk premium. Prolonged uncertainty could keep freight and insurance costs elevated even while ships continue using the route. A further deterioration could force more vessels onto longer routes, increasing delivery times and inflationary pressure.
The second outcome appears the most plausible in the near term. Full normalisation requires a sustained period of safe commercial voyages. Until that happens, oil prices may continue reacting sharply to every new incident or security announcement.
Oil Is Becoming a Market of Routes
The Red Sea situation illustrates a structural change in the energy market. Production volumes, inventories and exporter policies remain important, but ports, straits, insurers and shipping companies are becoming equally significant.
The principal risk is increasingly shifting from the oil field to the transportation corridor. A disruption does not need to stop supply completely to influence prices. It only needs to make delivery sufficiently expensive or uncertain.
Saudi Arabia’s initiative is an attempt to preserve the credibility of the Red Sea as an alternative export route. Its success will not be measured by the number of participating countries alone. It will be measured by whether tankers can complete regular voyages safely, predictably and at commercially sustainable cost.