Tuesday, 22 September 2026
Escalating conflict around Saudi Arabia and Yemen is creating new pressures for European businesses through energy markets, disrupted oil supplies and uncertainty along the Red Sea trade corridor. The effects extend beyond shipping, increasing risks for manufacturers, logistics operators, construction companies and other businesses dependent on fuel, imported materials and international supply chains.
Energy provides the most direct connection with Europe. Attacks in September disrupted Saudi Arabia’s East-West oil pipeline and affected exports through Yanbu on the Red Sea. Saudi Aramco subsequently cancelled some cargoes intended for European customers and redirected additional crude towards Gulf export terminals. The disruption has been particularly relevant for Central Europe, where Saudi crude has become one of the alternatives to Russian supplies. Poland’s Orlen sought replacement cargoes from other markets following the cancellations while reporting that its refineries continued to operate normally.
Shipping disruption represents another source of pressure. Large crude carriers have increasingly avoided Bab el-Mandeb as security conditions around the strait have deteriorated. S&P Global reported that no VLCC passed through the waterway after 9 September during the period it examined, compared with 24 crossings in August and 63 in July. Rerouting vessels increases journey times, consumes additional shipping capacity and can raise freight and insurance expenses.
The consequences potentially reach much further than the oil industry. The Red Sea and Suez Canal provide the shortest major maritime connection between Asia and Europe, carrying machinery, components, consumer products and industrial materials. The route remains operational and some shipping continues to use it, but persistent instability increases the risk of delays and diversions. For European companies, that can mean carrying larger inventories, committing more working capital to goods in transit and reconsidering the resilience of supply chains built around predictable shipping schedules.
European companies were already reporting higher cost expectations following the wider escalation in the Middle East earlier in 2026. ECB research found businesses becoming more concerned about non-labour expenses, with transport and construction particularly sensitive because of their exposure to fuel and energy prices. Higher energy costs can also influence investment decisions and eventually feed into the prices businesses charge their customers.
These pressures have implications for European property markets. Logistics occupiers can face higher transport and inventory costs, manufacturers are exposed to energy and component prices, while construction companies depend on internationally sourced equipment and materials. Retail, hotels and aviation are similarly vulnerable to transport and fuel costs, and energy-intensive properties such as data centres can be affected indirectly through changes in electricity prices.
The macroeconomic impact nevertheless remains manageable under the ECB’s central assumptions. Its September projections put euro-area inflation at an average 3.0% in 2026 and economic growth at 0.9%. This points to an economy experiencing additional cost pressure rather than a broad contraction, although a prolonged deterioration in Middle East energy and shipping conditions would increase the risks to that outlook.
Repeated disruption to international shipping could also influence longer-term decisions about where European companies manufacture and store goods. Diversifying suppliers, holding more inventory and moving selected production closer to customers can reduce dependence on vulnerable maritime routes. Such changes could eventually support demand for manufacturing and logistics property in Central and Eastern Europe, although there is not yet sufficient evidence to attribute a new wave of nearshoring specifically to the latest Saudi-Houthi escalation.
For European businesses, the importance of the conflict therefore extends well beyond Saudi Arabia and Yemen. Disruption to Saudi energy exports and uncertainty around Bab el-Mandeb are adding another layer of risk to energy procurement, transport costs and supply-chain planning. The longer the instability persists, the greater the incentive for European companies to strengthen the resilience of their energy supplies, logistics networks and industrial operations.
Source: CIJ.World Research & Analysis Team
