Encircled: The Houthi Maritime Blockade of Saudi Arabia and Trapped Crews With No Way Out

For five months, the working assumption across the industry has been that the Strait of Hormuz crisis, however severe, was a single-chokepoint problem with a single-chokepoint solution. Cargo could move west. Saudi crude could reach the Red Sea overland and load at Yanbu. The Cape route was expensive and slow but it existed. Every contingency plan drafted since February rested on the premise that one door was closed and another remained open.

As of last Monday, that premise no longer holds.

A Siege for a Siege

On July 20, Yemen's Houthi forces announced a complete maritime blockade of Saudi Arabia. Military spokesperson Yahya Saree framed the declaration, delivered in a video address, as "a siege for a siege," a reciprocal answer to the air and maritime restrictions the Saudi-led coalition has maintained against Houthi-held territory for the better part of a decade. The EU naval mission's subsequent notice to shipping conveyed the operative terms plainly: vessels loading or discharging at any Saudi port are prohibited, and ships with Saudi interests are advised to avoid the Red Sea and Gulf of Aden entirely until the threat level falls.

The geography is what makes this consequential. Bab al-Mandeb narrows to roughly 29 kilometers at its tightest point, funneling all Suez-bound and Suez-origin traffic through two channels. Some 4.1 billion barrels of crude and refined products moved through it in 2024, around five percent of the global total, and volumes had risen sharply this year, reaching 7.4 million barrels per day in June. That increase was not organic growth. It was displacement. Loadings out of Yanbu had climbed to roughly four million barrels per day in recent weeks, against something under a million a year ago, as Saudi Arabia pushed crude westward through the East-West Pipeline precisely because the eastern route was shut.

The blockade targets that relief valve directly, and it was not improvised. The IRGC Quds Force commander described the design in June, warning of a security belt stretching from the Strait of Hormuz to Bab al-Mandeb. With Hormuz already running at roughly 89 percent interdiction under Iranian naval enforcement, the July 20 declaration completes it, with two forces holding declared interdiction positions at opposite ends of the Arabian Peninsula. Closing both simultaneously puts something on the order of a quarter of the world's oil and gas supply behind a blockade.

What the Houthis have not yet done is enforce it kinetically. No vessels or port infrastructure have been struck in service of the declaration, and yet ships are already rerouting away from Bab al-Mandeb in growing numbers, which is the point worth sitting with. A blockade does not require a single missile to function. It requires only that the market believe the missile might come. The commercial effect of a credible threat is indistinguishable from the commercial effect of an actual attack, and it arrives faster and costs the declaring party nothing.

What the Market Has Done About It

The insurance response has been less a repricing than a loss of consensus. War risk premiums now run between three and ten percent of hull value against a pre-conflict benchmark of 0.25 percent, meaning a $100 million tanker faces somewhere between $3 million and $10 million per transit where it once faced roughly $250,000.

The width of that range is the real signal. A market that agrees on risk produces a tight band. A market quoting three to ten percent for the same passage does not agree on anything. Marcus Baker, Marsh's global head of marine, cargo and logistics, has described rates as having see-sawed, with many markets incompatible with each other and holding differing views on the appropriateness of rating, while noting that capacity itself remains available. Capacity without pricing consensus is a specific and awkward condition for a buyer. Cover can be found, but what it should cost is genuinely unsettled, and two brokers approaching two syndicates on the same risk may return quotes that differ by a factor of three.

Routing has become the variable underwriters care most about. The risk profile shifts materially depending on whether a vessel transits via the northern Iranian passage or the southern Omani one, and that choice now carries a sanctions dimension as well as a physical one. Operators who treat routing as a navigational decision rather than an underwriting and compliance decision are leaving the most consequential lever they still control unexamined.

Policies placed before July 20 are the immediate concern. Those were underwritten against a world in which Bab al-Mandeb was a functioning alternative. That assumption is now stale, and the geographic scope, premium basis, and notice provisions in those contracts deserve review before the next scheduled renewal rather than at it.

Six Thousand Seafarers Trapped

All of the above is the commercial account. It is not the most important one.

Roughly 6,000 seafarers remain aboard some 500 ships moored in the Persian Gulf, behind a strait they cannot safely transit. IMO Secretary-General Arsenio Dominguez has put the matter without commercial euphemism, observing that these are ordinary crew members who are "not trained for combat," aboard vessels with no capacity to defend themselves against missiles or drones.

They are there because an evacuation failed. Of approximately 20,000 seafarers stranded when the crisis began, around 11,000 were brought out through an IMO-supported initiative before operations were paused on June 25. Addressing the IMO Council's 137th session in early July, the Secretary-General confirmed he was still seeking guarantees that vessels could use either of the designated alternative routes without risk of attack. That framework was built with Oman's cooperation around the established traffic separation scheme's eastbound lane, on the condition that all parties hold fire during the transit window. Those guarantees have not materialized. The corridor exists on paper, but nobody will underwrite it in practice, in either sense of the phrase.

Meanwhile the risk to those still aboard has not held steady. A dozen ships have been attacked in and around Hormuz since July 6, killing two seafarers and injuring more than a dozen others. Two deaths is a small number set against 6,000 people and a global trade system. It is not a small number to two families, and it is the clearest available evidence that the population still sitting at anchor is not merely inconvenienced.

For shipowners and managers, this is where the humanitarian and the legal converge. The Maritime Labour Convention's duties toward crew do not lapse because a war started. P&I cover addresses crew welfare, repatriation, and liability for injury and death, and those exposures are live right now for every vessel in the trapped fleet. CONWARTIME and its equivalents give the master authority to refuse orders into unreasonable danger, an authority that, exercised or declined, will be examined closely in any subsequent dispute. Owners with vessels in the Gulf should be recording risk assessments, instructions, and crew communications contemporaneously, because the documentary record built now is the record that will be tested later.

There is also a workforce question underneath the immediate one. Allianz's Safety and Shipping Review, published at the start of this month, flagged crew abandonment at a record high across six consecutive years of increase, and framed seafarer welfare not as a discrete ethical matter but as an operational resilience problem. An industry that cannot keep crews safe will not keep crews at all. Six thousand people held at anchor for five months, in a region where a dozen ships have been hit in three weeks, is that argument made in the most concrete terms available.

Where This Leaves Operators

The dual closure is the most significant structural development in maritime risk since February, and its most underpriced dimension is duration. Elevated freight rates and war premiums are visible and quoted. What is not yet reflected anywhere is the possibility that neither chokepoint is reliably transitable for another two quarters, a scenario that puts sustained pressure on Cape routing capacity, on alternative port and pipeline infrastructure, and on the balance sheets of operators who have now absorbed five months of extraordinary cost with no resolution in view.

Three things warrant attention this week rather than next quarter:

Review war risk coverage against post-July-20 conditions, specifically whether policy scope contemplates a declared blockade of the Red Sea route and what cancellation notice your underwriters retain. Cover written on a pre-blockade view of the world may be adequate. You want to know that rather than assume it.

Formalize the crew and CONWARTIME position for any vessel in or approaching the region. Where a master has assessed transit as unreasonably dangerous, that assessment and the resulting instruction need to exist in writing, dated, at the time it was made.

For cargo interests, check what your policy does across a protracted disruption (storage ashore, deviation, delay, and the sue and labour provisions that may respond to extraordinary expense incurred preserving or rerouting goods). General average is a realistic prospect for any vessel that has taken action in response to the conflict, and a cargo owner discovering their coverage position after a GA declaration is a cargo owner in a poor negotiating posture.

The Arabian Peninsula has not been blockaded at both ends in the modern history of the industry. There is no precedent to reason from and no playbook to follow. What there is, for now, is the discipline of getting your own documentation, coverage, and crew position in order, which is the part of this situation that operators still have control over.