Pipeline Reroutes Oil Amid Hormuz Blockade

Saudi Arabia's East-West pipeline has reached its maximum operating capacity of 7 million barrels per day, as confirmed by Saudi Aramco CEO Amin Nasser in early March 2026. This strategic move reroutes oil from the Persian Gulf to the Red Sea port of Yanbu. The pipeline, built to bypass the Strait of Hormuz, is now essential for maintaining crude export continuity. Prior to the current crisis, it typically carried about 2.8 million barrels daily. The increased use is a direct response to the conflict in the Gulf, triggered by U.S. and Israeli attacks on Iran, which has led to the blockade of the Strait. This chokepoint normally handles about 20% of global oil and LNG supplies. The pipeline's full activation highlights Saudi Arabia's investment in export routes, now a critical lifeline for global energy markets.

Surging Yanbu Exports Fuel Price Surge

Crude oil exports from Saudi Arabia's Yanbu port on the Red Sea have surged. Following the conflict's start, Yanbu exports rose from an average of 760,000 barrels per day in January-February 2026 to nearly 4 million barrels per day by late March 2026, with potential to reach 5 million by month's end. This shift aims to lessen the impact of Persian Gulf disruptions. Global markets have reacted sharply: benchmark Brent crude oil prices have stayed above $100 per barrel, hitting highs not seen since mid-2022. Brent crude closed just over $108 per barrel on March 26, 2026. Analysts estimate this price level could cause a $500 billion global economic shock through higher inflation and reduced demand.

Saudi Arabia's Production Capacity and Market Impact

Saudi Arabia, which holds about 70% of OPEC+'s spare capacity, can produce up to 12 million barrels per day. In February 2026, output was around 10.1 million barrels per day. This makes the Kingdom a key producer, though its easily available spare capacity might be lower, around 1.4 million barrels per day in February 2026. Past Middle East tensions have also driven up oil prices, as seen in 2018. The International Energy Agency (IEA) called the current situation the "greatest global energy security challenge in history," estimating potential daily supply disruptions of up to 10 million barrels. While Saudi Arabia's East-West pipeline is at full capacity, Yanbu port has its own limits. Its nominal loading capacity is about 4.5 million barrels per day, with effective capacity closer to 4 million. The UAE's pipeline to Fujairah also bypasses the Strait but has faced operational suspensions due to attacks, showing the vulnerability of such alternative routes.

New Vulnerabilities Emerge

Using the East-West pipeline and Yanbu port to manage this crisis creates new risks. Yanbu port's effective loading capacity is a limitation, preventing it from fully replacing lost export volumes from the Persian Gulf. Additionally, the security of the Bab el-Mandeb Strait, which is essential for shipping from Yanbu to Asia, is threatened by Houthi militants. This adds further risk to supply chains. The ongoing closure of the Strait of Hormuz is also nearing global oil and gas storage limits, raising the possibility of production shutdowns. Regional infrastructure has already been hit; Saudi Arabia's Ras Tanura refinery was shut after drone strikes, affecting domestic operations. Macquarie Group analysts warn that if the Strait remains closed through the second quarter, prices could hit $150 or $200 per barrel, potentially causing a global recession. The International Energy Agency's release of 400 million barrels from strategic reserves provides a short-term buffer but cannot sustain long-term supply gaps.

Volatility Expected to Continue

Energy analysts expect continued price volatility, with elevated levels likely through 2026 if geopolitical tensions continue. Goldman Sachs forecasts Brent crude to average $110 per barrel for March and April 2026 due to ongoing disruptions. The length of the conflict and when the Strait of Hormuz reopens will largely determine longer-term commodity prices. The market is precariously balanced between immediate supply worries and the economic impact of sustained high energy costs. This situation underscores the fragility of global energy supply chains when key transit routes are threatened.