Key facts
- A drone strike damaged two gas tankers in Egypt's Damietta port, near the Suez Canal.
- The U.S. Treasury sanctioned six entities and individuals in China, India, Russia, and Iran.
- The sanctioned networks support Iran's Mahan Air, accused of transporting military personnel, weapons, and drones.
- The U.S. Treasury also targeted a front company linked to Iran's Revolutionary Guard Corps.
- The incident has heightened concerns about the security of the Suez Canal and its related Sumed pipeline.
A drone strike that damaged two gas tankers in Egypt's Mediterranean port of Damietta has renewed concerns over the security of the Suez Canal and its associated Sumed pipeline, a critical export route for Saudi oil. The attack, occurring amid wider regional conflicts, adds to worries about maritime chokepoints.
While Iran and its Houthi allies have previously targeted vessels in the Strait of Hormuz and Bab el-Mandeb, the Suez Canal and Sumed pipeline have served as a safer northbound option for Saudi energy cargoes. The potential disruption to this route threatens up to five million barrels per day of oil supply. Data indicates a significant increase in crude loadings from the Sumed pipeline from April to July, with more vessels seen near Port Said anchorage.
Experts suggest the Damietta attack may not immediately threaten the canal itself, and the market has not fully priced in such a disruption. However, the capability of groups like Iran and the Houthis to strike the canal zone with drones and rockets could lead to higher war risk insurance premiums. Shipping companies are reassessing security measures near Egyptian ports.
Even before this incident, Middle Eastern oil faced longer and more expensive routes to global markets. Sustained disruption to the Suez Canal would significantly impact Asian refiners, more than doubling voyage times to Northeast Asia compared to the Bab el-Mandeb route. While the Sumed pipeline's capacity and historical lifting volumes suggest it could handle more crude, the overall importance of the Suez Canal remains paramount.