A large share of Gulf oil exports is facing unprecedented challenges as regional tensions disrupt major energy shipping routes.
The Houthi movement’s announcement of a maritime blockade targeting ships linked to Saudi Arabia, combined with the continued closure of the Strait of Hormuz amid the US-Iran conflict, has placed additional pressure on global oil transportation networks.
According to economic data, shipping a barrel of oil from the Gulf to Asian markets now costs around $4.17, compared with approximately 88 cents per barrel for shipments heading toward European markets.
The difference is largely due to longer alternative routes required for Asian-bound shipments, while European deliveries benefit from shorter access to alternative ports.
Rising Insurance and Shipping Risks
Regional tensions have also increased maritime risk premiums, which are calculated as a percentage of a vessel’s insured value for each voyage.
Before the conflict, the rate was around 0.25%, meaning insurance for a single voyage involving a vessel valued at $100 million would cost about $250,000.
During the peak of tensions and war-related risks in July, the premium surged to between 7.5% and 10%, raising the insurance cost for the same voyage to as much as $10 million.
With signs of easing tensions in late March, the risk premium fell to around 1%, equivalent to about $1 million for a vessel valued at $100 million.
Additional Costs for Oil Shipments
Economic estimates show that oil shipments heading to Asia face additional costs exceeding $5 million, including around $1.6 million in extra fuel expenses and $1 million in Suez Canal transit fees.
By comparison, the estimated cost of shipping tankers toward Europe is around $1.7 million.
Insurance premiums for ships and tankers operating in the Red Sea have also increased by 150% following the latest regional escalation.
Gulf Countries Seek Alternative Routes
To reduce reliance on vulnerable maritime routes, Saudi Arabia has relied on the East-West Pipeline (Petroline), which transports oil from eastern fields to the Red Sea port of Yanbu with a capacity of up to 7 million barrels per day.
However, the route has become exposed to higher risks following attacks targeting Saudi-linked vessels in the Red Sea.
Saudi Arabia also uses an alternative route to supply European markets, transporting shipments from Egypt’s Ain Sokhna port through the SUMED pipeline to the Mediterranean.
However, the pipeline’s capacity is limited to around 2.5 million barrels per day.
The United Arab Emirates has benefited from the Habshan-Fujairah pipeline, which connects Abu Dhabi oil fields to Fujairah Port on the Gulf of Oman.
With a capacity of around 1.8 million barrels per day, the pipeline allows the UAE to bypass the Strait of Hormuz and directly access the Indian Ocean and Asian markets.
Through this route, UAE exports have recovered to around 4 million barrels per day, approaching their highest levels since 2017.
Iraq, meanwhile, resumed operations on the Kirkuk-Ceyhan pipeline with Türkiye in 2025, but its capacity remains limited at around 250,000 barrels per day.
This figure is small compared with Iraq’s total exports of approximately 3.4 million barrels per day, around 95% of which traditionally pass through the Strait of Hormuz.
Strait of Hormuz Closure Disrupts Energy Markets
The announcement by US President Donald Trump on July 8 ending a temporary agreement with Iran and resuming military operations led to the renewed closure of the Strait of Hormuz.
The move disrupted global energy markets as maritime traffic involving oil and gas tankers was affected, raising concerns over the security of one of the world’s most important energy corridors.
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