The cost of insuring an oil tanker loaded from Saudi Arabia's main Red Sea port has tripled in recent weeks, industry sources told Reuters, adding to the major crude producer's struggles to find a viable channel for its exports.
Saudi Arabia used its East-West pipeline to divert around four million barrels per day - four per cent of global supply - to the Red Sea after Iran constrained Persian Gulf exports via the Strait of Hormuz from March in response to US and Israeli air strikes.
The kingdom shut the pipeline on September 11 after drone attacks that it said came from Iraq, where Iran backs some militia groups. It is now building volumes back but loadings at the major port of Yanbu have yet to resume, according to industry sources, satellite images and shipping data.
Quoted war risk premiums for Saudi-linked tankers calling at Yanbu have risen to around three per cent of a vessel's value, four industry sources told Reuters. They were less than one per cent in early July, before London's marine insurance market designated that stretch of water as high-risk in response to Yemen's Iran-aligned Houthis attacking shipping near the Bab el-Mandeb strait.
For ports south of Yanbu, including Jizan, around 50 miles (80 kilometres) from the border with Yemen, quoted premiums - around one per cent in early July - can rise as high as seven per cent, almost as much as transits through Hormuz, which range between six per cent and nine per cent, the sources said, declining to be named due to data sensitivity.
"It's easier to do the Strait of Hormuz right now...because at least in the Strait of Hormuz, the US is providing some cover. In the Red Sea, there's nothing," Pankaj Khanna, CEO of shipping group Heidmar Maritime Holdings Corp, told Reuters.
"If you have a Saudi connection, then you have a problem."
The Iran-aligned militants who seized swathes of the Yemeni coast and captured Perim Island in the middle of the Bab el-Mandeb strait this month have vowed to target only vessels linked to Saudi Arabia due to its backing of Yemen's government.
Tankers transiting the Red Sea without any Saudi connection typically pay between 0.2 per cent and 0.3 per cent, with additional discounts often available, the four industry sources said.
Khanna said any tanker docking at Yanbu will have a Saudi connection and hence be at risk of being hit. Heidmar is avoiding Saudi ports while remaining active in both Hormuz and the Red Sea, he said.
The Houthis have also targeted Saudi Arabia itself. The kingdom intercepted six ballistic missiles fired by Yemen's Iran-backed Houthis on Thursday, including towards the Yanbu area, the Saudi-led coalition in Yemen said.
Earlier this week, two trading sources said traders were getting ready for Saudi oil loadings in the Red Sea by moving tankers to Egypt's Mediterranean Port Said for ship-to-ship transfers.
That could allow them to sail south out of the Red Sea via Bab el-Mandeb instead of heading north through the Suez Canal and then - for Asia-bound cargoes - via southern Africa, a much longer and more costly route.
There is no public data for agreed rates in the marine insurance market, which could vary from those quoted by brokers and underwriters.
But the jump in quoted premiums shows that despite Saudi Arabia's investment of billions of dollars in infrastructure to provide an alternative export corridor, it now faces similar constraints as other gulf oil producers relying on Hormuz.
"We have seen rates certainly north of seven per cent for all calls south of Yanbu," said David Smith, head of marine at insurance broker McGill and Partners.
Saudi Arabia's government media office did not immediately respond to a request for comment.
The US-Iran war has prompted some gulf oil producers to rush to buy their own tankers to protect their oil exports, shipping sources say.
As a result, the average price of old tankers has soared to above $100 million, five sources said. Saudi Arabia this week denied allegations by Iraq that it had bought 25 oil tankers worth an estimated $4.5 billion, saying that the rise in oil transport costs was due to other factors linked to the war.
War risk premiums typically cover seven-day voyage periods and are reviewed every 24 hours, meaning a journey from Yanbu could cost $3 million, or some $7 million from other Saudi ports further south or via Hormuz, up from at least $100,000 before the war.
Oil producers also need to pay at least $500,000 a day for chartering a tanker, according to industry estimates, and bunker fuel costs during the voyage could add another $100,000 or more.
The US military has been providing some aerial support to ships sailing via Hormuz in recent months, sources have told Reuters. No such protection exists in the Red Sea, where the European Union provides security but says it needs more ships.
A US official, speaking on condition of anonymity, said the United States did not automatically provide protection when asked by private companies.
Saudi Arabia's crown prince sought US military help this month to counter the Houthis, sources told Reuters, and the Saudi cabinet has appointed the Saudi Reinsurance Company to lead the country's marine war risk insurance pool.
Corey Ranslem, CEO of maritime security group Dryad Global, said Bab el-Mandeb transits remained challenging, with tanker-only figures totalling "only a handful of vessels per day".
"What continues to move consists primarily of dry bulk cargo, certain products, and a limited number of tankers without Saudi affiliations."
(Reporting by Jonathan Saul, additional reporting by Idrees Ali in Washington and Michael Jones with The Insurer, Editing by Dmitry Zhdannikov, Veronica Brown and Philippa Fletcher)