The Suez Canal is rapidly capitalizing on the shifting shipping routes triggered by the "avoid Hormuz" trend sweeping through Middle Eastern nations, though this resurgence is unfolding alongside rising energy transport costs across the region and the globe. Not long ago, US Treasury Secretary Bessent stated that the Strait of Hormuz would be bypassed within two years as alternative corridors like onshore oil pipelines develop, emphasizing that Middle East crude and gas pipelines, along with other critical port infrastructure, would route around the strait in that timeframe—even suggesting it would become a "valueless waterway."

In reality, energy shipping adjustments among Middle Eastern countries are already well underway: Saudi Arabia moves crude via overland pipelines to Red Sea ports, while threats from the Houthi forces near the Bab el-Mandeb Strait have forced some Asia-bound tankers to first head north through the Suez Canal before looping around Africa eastward. This "rerouting of alternative routes" helps explain the canal's robust recovery, with July revenue climbing 42% year-on-year and vessel transits up 27%. Additionally, the UAE's expansion of east coast ports, pipelines, and rail networks—alongside Saudi Arabia's intensified investment in Yanbu port energy infrastructure and its hydrocarbon capacity—aligns with this strategy of weakening strait constraints through alternative infrastructure.

Ship diversions drive revenue recovery, positioning Suez back as a key energy artery

The 42% year-on-year jump in Suez Canal revenue for July stems primarily from the fact that the US-Israel-Iran conflict has left the Strait of Hormuz effectively shut down, with commercial vessels facing extreme danger of military strikes at any moment. Combined with the military threats posed by Iran-backed Houthi forces in the southern Red Sea, this has pushed more ships to use the Egyptian waterway. According to data from Egypt's Central Agency for Public Mobilization and Statistics, 1,340 vessels transited the canal during the month—27% more than in July 2025 and up from 1,208 in June, extending the partial recovery that began earlier this year.

As shown above, July revenue rose 42% year-on-year, yet this figure remains well below pre-Gaza war levels. Source: Egypt's Central Agency for Public Mobilization and Statistics, Central Bank of Egypt, EFG Hermes. Of the vessels transiting in July, tankers accounted for 526, up from 485 the previous month. This increase likely reflects, at least in part, Saudi crude exports being rerouted through the Red Sea following the closure of the Strait of Hormuz. Subsequently, threats from Yemen's Houthi group led many ships to turn north instead of crossing another critical global energy chokepoint—the Bab el-Mandeb Strait.

Egyptian statistics agency data show canal revenue climbed to $505 million in July, the highest monthly level since December 2023. In early 2024, the Houthis began attacking international shipping in the southern Red Sea to pressure Israel during its war with Hamas in Gaza, causing canal transits to plummet. This shortest maritime link between Europe and Asia has long been a vital source of foreign currency for Egypt, alongside tourism and overseas remittances. Suez Canal Authority Chairman Osama Rabie said last week on a local TV program that the authority expects full-year revenue to rise to between $5.8 billion and $6 billion, up from $4.1 billion in 2025.

As illustrated, canal transits have grown following the Hormuz closure—the Iran conflict has pushed alternative energy transport routes through the Red Sea. Despite the recent uptick, both transits and revenue remain far below pre-Gaza war levels. According to Egyptian statistics agency data, the canal generated a record $10.2 billion in revenue in 2023, when roughly 2,300 vessels passed through in April alone. Mohamed Abu Basha, head of macroeconomic analysis at investment bank EFG Hermes, noted that with crude exports to Asia being rerouted again and several European shipping firms announcing the resumption of some Red Sea routes, the recovery momentum is expected to persist in the coming months.

"Maritime exclusion zone" and onshore strikes raise safety and energy costs for alternative routes

Iran's proposal to establish a new maritime "exclusion zone" and its sanctions list threatening vessels entering those waters reflect an attempt to convert navigation control into sustained economic pressure. Iranian Supreme National Security Council Secretary Rezaei has claimed a transit arrangement will be signed with Oman, while Parliament Speaker Qalibaf has signaled stronger future responses; these statements mean shipowners must not only assess whether a route is physically passable but also evaluate differentiated risks tied to flag, cargo origin, destination, and escort relationships. The Suez Canal is thus capturing alternative transport demand, but the energy shipping system continues paying extra costs for uncertainty.

The Houthis launching land-based strikes on Saudi Arabia's deep energy infrastructure further undermines the assumption that "delivering oil to the Red Sea guarantees export safety." Maritime attacks extend voyage lengths, while damaged onshore facilities may reduce available crude or refined products for transport—both shocks simultaneously push up delivery costs. This also dictates a divergence in investment returns: the canal, certain alternative ports, and tankers able to operate safely may absorb rerouting demand, while energy importers and transport-intensive businesses face cost pressures. The Suez's full-year target of $5.8–6 billion implies growth of roughly 41.5%–46.3% versus 2025, yet remains clearly below 2023's $10.2 billion, with recovery potential and security constraints coexisting.

Based on Brent crude futures at $60.85 and WTI at $57.42 at end-2025, both have risen approximately 61.5% and 63.2% respectively year-to-date. For Egypt, diversions boost canal tolls and foreign currency earnings; for energy-importing nations, higher combined energy and transport costs push up landed prices, squeezing corporate margins and adding inflationary pressure. Military conflict has materially reduced transits through key straits. In the ten days through September 6, an average of just 10 bulk commodity vessels passed daily through the Strait of Hormuz—the lowest since May; following the July Houthi attacks on Saudi energy facilities, only 11 bulk commodity ships transited the Bab el-Mandeb on July 26, falling to multi-month lows. On September 8, the Houthis further struck multiple cities in southern Saudi Arabia, with Riyadh reporting 73 injuries and partial disruptions to energy facility operations. Risks expanding from maritime routes to onshore infrastructure mean exporters, even with alternative ports, still bear security pressures across production, loading, and transport.

Persistently elevated rerouting costs under the US-Iran war geopolitical backdrop are poised to serve as a long-term positive catalyst supporting the tanker shipping bull market. A tanker voyage from Saudi Arabia's Yanbu port to Taiwan, China, takes roughly 19 days via the Bab el-Mandeb; rerouting via the Suez Canal, Mediterranean, Gibraltar, and Cape of Good Hope extends this to about 48 days—adding 29 days. Fuel costs rise from approximately $1.26 million to $2.87 million, an increase of about 127.8%, plus roughly $1 million in Suez Canal tolls. Based on these components alone, added fuel and canal fees total around $2.61 million. Longer voyages also tie up more vessel time, reducing the transport turnover the same fleet can achieve, further supporting freight rates.

Using February 27—pre-war—as the baseline, freight rates on the TD3C route for 270,000-tonne tankers from the Middle East Gulf to China have surged substantially. Baltic Exchange data show the Worldscale index jumped from WS216.89 to WS677.22 in the weekly report released September 4, a gain of roughly 212.2%; corresponding round-trip time charter equivalent earnings (TCE, or daily earnings after deducting voyage costs) rose from $209,550 per day to near $704,000, up about 236%—approximately 3.36 times pre-war levels. Compared to the near $585,000 level on August 21, daily earnings have gained another 20.3%. This reflects both a military risk premium and effective capacity tightness caused by vessels being trapped, rerouted, and slowed in turnover.