LONDON, July 30 (Reuters) - A drone strike that damaged two gas tankers in Egyptian waters has renewed energy security concerns about the nearby Suez Canal and a related pipeline, a vital export route for Saudi Arabian oil since the beginning of the Iran war.
Even as Iran and its Houthi allies have fired on tankers transiting the Strait of Hormuz and Bab el-Mandeb, Egypt's Suez Canal and Sumed pipeline continued to offer safe, northbound export routes for Saudi Red Sea energy cargoes.
While no party has claimed responsibility for Wednesday's attack on the tankers at Egypt's port of Damietta, which is located on a branch of the Nile Delta close to the Mediterraean, or publicly threatened the Suez Canal, the potential risk to the chokepoint has added to market concerns.
"The passage through the Red Sea, even via the longer Mediterranean route, could be put at risk, which threatens up to five million barrels per day of oil supply that can currently bypass the Strait of Hormuz," said Saul Kavonic, head of energy research at advisory company MST Marquee.
Hardly any tankers are passing through the Gulf's chokepoint at Hormuz, previously the route for about a fifth of global oil and liquefied natural gas supply.
Saudi Arabia rerouted most of its oil to the Red Sea and its Yanbu terminal after the war began, but Houthi threats and attacks since last week have now stopped many tankers using that route.
A growing volume of Saudi oil, along with other shipping, has instead been heading north up the Red Sea towards Suez and the Sumed pipeline, according to data from Kpler, a market intelligence company.
For Asian customers that means a longer voyage around Africa instead of south via the Gulf of Aden.
Crude loadings from the pipeline, which crosses Egypt from the Red Sea to the Mediterraean port of Sidi Kerir, have risen to 28.79 million barrels in July from 19.52 million in April, before the Houthis' July 20 threat to prevent Saudi oil exiting via Bab el-Mandeb.
Around 30 ships have clustered around the Port Said anchorage at the canal's Mediterranean end compared to around 20 earlier this week, ship-tracking data on the MarineTraffic platform showed on Thursday.
"We've seen a clear increase in crude/condensate tankers heading north after loading in the Red Sea," said George Morris of energy analytics firm Vortexa, attributing this to the Houthi threats.
Crude is still flowing south through Bab el-Mandeb, though at around half the volume at the start of the month, the Kpler data showed, with around 43% of Yanbu loadings heading south compared to 81% in June.
Although many tankers are avoiding Bab el-Mandeb altogether, some, including Chinese vessels, have permission from the Houthis to pass. An increasing number of tankers are also travelling with their trackers turned off, Morris said.
And the Damietta attack does not necessarily imply any immediate threat to the canal, said Aly Blakeway, head of Atlantic LNG at S&P Global Energy. "The market isn't pricing in disruption to the canal at this stage," Blakeway said. Despite the attack, oil prices fell on Thursday with traders reacting to Iranian-Omani talks on Hormuz.
The Suez Canal Authority did not immediately respond to requests for comment.
A view of the Damietta port, Egypt, July 28, 2026. European Union/Copernicus Sentinel-2/Handout via REUTERS
LONG, UNCERTAIN ROUTE TO MARKET
Iran has threatened to stop all Middle Eastern energy exports, saying that no oil should flow from the region while the United States blockades Iranian tankers.
The Houthis announced a blockade on all Saudi shipping - a category that may include any vessels seeking to carry crude to the Mediterranean after loading at Yanbu.
They have also both demonstrated that the canal zone is within the range of their drones and rockets, having repeatedly fired both at Israel, though the long distances involved give more opportunity to bring down projectiles.
That fact alone may now raise insurance prices, said Martin Senior, head of LNG pricing at Argus.
"Insurers may also command higher Additional War Risk Premiums for Suez in light of the (Egypt) attack, given the increased risk to shipping and energy infrastructure in the region," he said, while noting that Iran had not made any specific threats.
Shipping companies were already re-evaluating their security arrangements for ships around Egypt’s Mediterranean ports near the Suez Canal, a maritime security source said.
In Egypt, the attack is not necessarily seen as evidence that Suez is at risk. "The canal is heavily guarded and secured around the clock," said Wael Kaddour, a former Suez Canal Authority board member.
Even before the attack, Middle Eastern oil was taking an increasingly long, complex and expensive route to reach global markets.
"Yanbu cargoes accounted for around 15% of Asia's seaborne crude/condensate imports in June, so sustained disruption has meaningful implications for Asian refiners — routing via Suez instead of Bab el-Mandeb more than doubles voyage times to Northeast Asia, delaying arrivals by roughly a month," said Morris.
Moving large volumes through Suez is awkward for other reasons too. Very Large Crude Carriers (VLCCs) have too deep a draught to traverse Suez fully laden and have to offload some crude through the Sumed pipeline before reloading it in the Mediterranean.
Still, more crude could still flow through Suez and Sumed. Last week 1.4 million barrels a day of oil were lifted from Sidi Kerir, compared to its historical weekly peak of 2.1 million bpd and Sumed's capacity of 2.5 million bpd.
Morris said around 10 VLCCs were likely to load at Sidi Kerir in the coming weeks, mainly serving Asian refiners.
That capacity - along with the uncertain outlook for Hormuz and Bab el-Mandeb traffic - underscores why Suez could be so important a route in the current crisis and why any threat to its operations could hit so hard.
"An attack anywhere within the canal region would substantially increase war risk insurance premiums. It would also substantially change the security assessment of the region," said Corey Ranslem, CEO of maritime security group Dryad Global.
"Disruption to the Suez Canal would have an almost immediate impact on prices. The inflationary pressure from longer voyages, higher freight, would be translated to the consumers almost immediately," said Matthew Wright, principal freight analyst at Kpler.
Reporting by Jonathan Saul, Marwa Rashad and Ahmad Ghaddar; additional reporting by Mohammed Ezz and Hannah Ellison; writing by Angus McDowall; editing by Jason Neely
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