A European Union naval mission said on Tuesday, it was leaving the Sounion stranded and its one million barrels of oil at risk of spilling into the sea.
While a major spill has yet to occur, the incident threatens to become one of the worst yet in the Iranian-backed rebels' campaign that has disrupted the $US1 ($A1.5) trillion in goods that pass through the Red Sea each year over the Israel-Hamas war in the Gaza Strip.
It also has halted some aid shipments to conflict-ravaged Sudan and Yemen.
"The private companies responsible for the salvage operation have concluded that the conditions were not met to conduct the towing operation and that it was not safe to proceed," the EU's Operation Aspides mission said.
"Alternative solutions are now being explored by the private companies."
Satellite images show the Sounion is still ablaze. (AP PHOTO)
The EU mission declined to answer questions from The Associated Press about the announcement, other than to say its "assets have been engaged in protecting the tugs involved".
The safety issue could be the fire burning aboard the vessel. Satellite images from Planet Labs PBC taken Tuesday afternoon and analysed by the AP showed the Sounion still ablaze.
The US State Department has warned that a spill from the Sounion could be "four times the size of the Exxon Valdez disaster" in 1989 off Alaska.
Meanwhile, there's the threat of attacks by the Houthis, who on Monday targeted two other oil tankers travelling through the Red Sea.
The Houthis have suggested they'll allow a salvage operation to take place, but critics say the rebels have used the threat of an environmental disaster previously involving another oil tanker off Yemen to extract concessions from the international community.
The Houthis initially attacked the Greek-flagged Sounion tanker on August 21 with small arms fire, projectiles and a drone boat.
A French destroyer operating as part of Operation Aspides rescued its crew of 25 Filipinos and Russians, as well as four private security personnel, after they abandoned the vessel and took them to nearby Djibouti.
Last week, the Houthis released footage showing they planted explosives on board the Sounion and ignited them in a propaganda video, something the rebels have done before in their campaign.
The Houthis have targeted more than 80 merchant vessels with missiles and drones since the war in Gaza started in October.
They seized one vessel and sank two in the campaign that has also killed four sailors. Other missiles and drones have either been intercepted by a US-led coalition in the Red Sea or failed to reach their targets, which have included Western military vessels as well.
The rebels maintain that they target ships linked to Israel, the US or the UK to force an end to Israel's campaign against Hamas in Gaza. However, many of the ships attacked have little or no connection to the conflict, including some bound
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