Energy & Commodities — 2026-07-29

Both Strait of Hormuz and Bab el-Mandeb Effectively Shut to Tanker Traffic as Lloyd's Withdraws War Risk Cover

BLUFLloyd's withdrawal has shut both chokepoints to Saudi tanker traffic simultaneously, leaving Riyadh's export capacity hostage to Houthi targeting decisions rather than naval escorts.

Windward assessed on July 27 that Hormuz recorded zero tanker crossings, with all six transits routed via the IRGC-controlled northern corridor, while Bab el-Mandeb tanker transits fell 39% and Saudi-linked crossings 46% since the July 20 Houthi blockade declaration 1. Business Insurance and Ontime+, both citing Financial Times reporting, said Lloyd's of London war risk insurers began excluding Saudi-linked vessels, including foreign-flagged ships that previously called at Saudi ports, from Red Sea coverage effective July 24, following Houthi attacks on the Saudi-flagged tankers Encelia and Layla 23. Windward attributed the sharpest tanker decline, to roughly 7.5 transits per day from about 12 previously, to that insurance withdrawal 1. Its July 28 imagery found Yanbu's King Fahd port operating entirely AIS-dark, with 22 vessels present and 12 actively loading, while three Bahri-operated tankers and the Greek-owned Merbabu have also stopped transmitting signals 13.

Analysis
Insurance markets, not naval interdiction, now govern Red Sea access for Saudi-linked cargoes, converting the chokepoint from a kinetic threat into a financial one that shipowners cannot route or escort around. Yanbu's fully dark loading operation shows Riyadh's East-West pipeline workaround for a closed Hormuz is itself now underwriting-constrained, leaving no comparable overland alternative if throughput saturates. Beijing's standing exemption for Yanbu-loaded cargo indicates the Houthis are running a selective economic-pressure campaign rather than a blanket closure, preserving latitude to tighten or loosen targeting by flag. Moderate confidence in this reading rests on convergent transit-count and insurer-side reporting rather than direct visibility into underwriting decisions.

4 sources

Two Closed Corridors: Hormuz and Bab el-Mandeb Both Effectively Shut to Tanker Traffic - Windward
Lloyd's insurers pull cover for Saudi-linked vessels - Business Insurance
Insurers Restrict Red Sea War Cover for Saudi-Linked Ships - Ontime+
Ship insurers restrict war coverage for Saudi Arabian cargoes in Red Sea - Financial Times