25 September 2026
Executive Summary
Saudi Arabia’s attempt to restore its Red Sea oil-export route faces a new commercial obstacle as war-risk insurance costs for tankers calling at the country’s principal Red Sea oil terminal have approximately tripled.
Industry sources report that quoted war-risk premiums for Saudi-linked tankers calling at Yanbu have risen to around 3% of a vessel’s value.
Saudi Arabia has been rebuilding flows through its East-West pipeline following the attacks earlier this month that forced its closure.
The pipeline provides a strategically important route from Saudi oilfields towards the Red Sea, allowing crude to avoid the Strait of Hormuz.
However, despite the restoration of pipeline flows, major crude loadings at Yanbu had not yet resumed according to industry sources, satellite imagery and shipping data available at the time of reporting.
The development exposes a critical distinction:
Restoring the pipeline does not automatically restore a commercially viable export route if ships cannot obtain affordable insurance to use the terminal.
UK Impact
For UK and European businesses, the development matters because Saudi Arabia has traditionally provided an important source of crude and refined products.
Potential consequences include:
- Higher marine insurance costs.
- Higher tanker charter rates.
- Increased delivered oil costs.
- Diesel-price pressure.
- Aviation-fuel costs.
- Greater dependence upon alternative crude suppliers.
- Longer shipping routes.
European refiners have already been seeking alternative supplies following disruption to Saudi Red Sea exports.
If Yanbu remains commercially difficult to use, that diversification pressure could continue.
Global Impact
Saudi Arabia’s East-West pipeline had been carrying approximately 4 million barrels per day, equivalent to roughly 4% of global oil supply, before the recent attacks forced its closure.
Its strategic purpose during the current conflict has been straightforward:
move crude westwards and avoid Hormuz.
But the alternative route leads to another maritime risk environment.
Tankers loading at Yanbu must operate within the Red Sea system while security risks around Bab el-Mandeb and attacks associated with the regional conflict remain elevated.
A war-risk premium of around 3% can represent a substantial additional voyage cost when applied to a tanker worth tens or hundreds of millions of dollars.
Those costs ultimately have to be absorbed somewhere within the supply chain.
Our View
This is an important reminder that infrastructure redundancy and commercially usable redundancy are different things.
Businesses should ask:
- Has Yanbu actually resumed crude loadings?
- Which vessels are willing to call?
- What war-risk premium is being quoted?
- Is cover available for the complete voyage?
- Who contractually pays the additional premium?
- Are shipowners imposing additional conditions?
- Are crews willing to operate the route?
- Are charter rates increasing?
- Can Saudi Arabia absorb some of the freight cost?
- Will crude discounts compensate buyers?
- Are European refiners restoring Saudi purchases?
- Is Bab el-Mandeb commercially navigable?
- Could further attacks close the route again?
- Are Gulf exports through Hormuz still required?
- Are ship-to-ship transfers near Oman continuing?
- What happens if both Saudi export corridors remain commercially constrained?
Businesses should therefore avoid treating the reopening of infrastructure as synonymous with normalisation.
A pipeline may work.
A port may work.
A tanker may be available.
But if the insurance required to connect those three components becomes prohibitively expensive, the supply chain can still fail commercially.
Physical capacity is only useful when businesses can afford to use it.
Risk Indicator: HIGH – SAUDI ARABIA, MARINE INSURANCE & RED SEA LOGISTICS
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The information contained within these Market Alerts is provided for general market awareness and informational purposes only. It does not constitute financial, legal, investment, regulatory or insurance advice. Whilst every effort has been made to ensure accuracy at the time of publication using multiple reputable and independently verified sources, geopolitical events, legislation, regulation and market conditions may change rapidly. Readers should obtain appropriate professional advice before acting upon any information contained herein.
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