Houthi Attacks Halve Red Sea Oil Flows, Raise Costs

The Yemen-based Houthi militia initiated attacks on commercial vessels in November 2023, initially targeting Israel-affiliated ships, then expanding to include vessels linked to the U.S. and UK, and any ship calling at Israeli ports. This strategic chokepoint, accounting for 15% of global maritime trade volumes, now sees an average of 4.0 million barrels per day (b/d) in 2024 through August, a stark decrease from 8.7 million b/d in 2023, according to the U.S. Energy Information Administration (EIA) and Vortexa data.

Consequently, the volume of crude oil and oil products rerouted around the Cape of Good Hope surged to 9.2 million b/d in the same period, up from 6.0 million b/d in 2023. The EIA notes that this inability to transit a major chokepoint leads to substantial supply delays and higher shipping costs, resulting in higher world energy prices.

Vessels continue to avoid the Suez Canal route for the foreseeable future due to ongoing security concerns, including the near-sinking of the MT Sounion carrying one million gallons of oil. The Strait of Hormuz remains the world's most crucial oil chokepoint, facilitating 20.9 million b/d in 2023.

The situation underscores the fragility of global oil supply chains, with the US urging Israel not to target Iran's energy sector after Iran's October 1st attack, fearing further escalation.