Saudi Oil Export Costs Surge as Red Sea Risks Mount

War-risk insurance costs for Saudi oil exports via the Red Sea have surged, eroding the cost advantage of avoiding the Strait of Hormuz. Quoted premiums for Saudi-linked tankers calling at Yanbu have roughly tripled since early July, while premiums for voyages through Hormuz and to southern Saudi ports are running even higher.

By AI Newsroom· Reviewed by Pranav, Founder & Editor-in-ChiefPublished 7 minutes agoUpdated 7 minutes ago0 views

Why It Matters

Rising insurance and charter costs add millions to each cargo and complicate Saudi efforts to route exports around the Strait of Hormuz, reducing export certainty and reshaping where and how Saudi crude is moved.

Key Facts

Yanbu quoted war-risk premium: Around 3% of a vessel’s value (tripled from <1% in early July)
Southern Saudi ports quoted premium (including Jizan): Up to 7%
Hormuz voyages quoted premium: Between 6% and 9%
Estimated war-risk insurance cost from Yanbu voyage: Roughly $3 million
Estimated war-risk insurance cost from southern ports or via Hormuz: Up to $7 million (compared with at least $100,000 before the war)

Insurance costs for Saudi oil shipments routed through the Red Sea have climbed sharply, narrowing the financial gap that once made the kingdom’s east‑to‑west export route an attractive alternative to the Strait of Hormuz. Quoted war‑risk premiums for vessels calling at the Red Sea port of Yanbu rose to about 3% of a ship’s value, up from below 1% in early July, according to figures cited by Reuters in an Oilprice.com report. Premiums are even higher for voyages involving Saudi ports farther south such as Jizan, where quotes can reach about 7%. Voyages through the Strait of Hormuz are being quoted in the 6–9% range. Those percentage shifts translate into multi‑million dollar insurance bills: a Yanbu voyage can carry roughly $3 million in war‑risk insurance, while shipments from southern ports or via Hormuz can reach as much as $7 million, compared with war‑risk costs of at least $100,000 before the conflict. Charter and fuel costs are also elevated, compounding the expense of each cargo. Charter rates are reported at a minimum of $500,000 per day, and bunker fuel can add at least another $100,000. Those items, combined with higher insurance, significantly raise the total cost to move Saudi crude by tanker. The current squeeze stems from disruptions to Saudi Arabia’s East‑West pipeline, a route the kingdom developed to bypass the Strait of Hormuz and move about 4 million barrels per day to Yanbu after Iranian restrictions reduced passage through the strait. Drone strikes forced a shutdown of the pipeline earlier in the month; Aramco has since restarted it at reduced throughput, but Yanbu loadings had not resumed as of Thursday despite prior reports of scheduled shipments. As a result, Aramco arranged roughly 60 million barrels for September and October loading from Ras Tanura, shifting shipments through the Gulf and conducting ship‑to‑ship transfers near Sohar. Security risks on both maritime approaches compound exporters’ challenges. Houthi forces have threatened Saudi‑linked vessels near Bab el‑Mandeb in the Red Sea, while U.S. forces have provided some aerial support around the Strait of Hormuz in recent months — a level of protection not reported for the Red Sea area. The combined effect is that Saudi exports now confront higher shipping and insurance bills and greater uncertainty regardless of whether cargoes transit the Red Sea route or the Persian Gulf. (Reporting based on an Oilprice.com article by Julianne Geiger, citing Reuters.)