Should Yemen’s Houthi group succeed in closing the Bab el-Mandeb Strait, it would severely affect a crucial global oil shipping lane. This action could lead to a new spike in crude prices, interrupt fuel deliveries, and intensify pressures on the worldwide economy.
On Monday, the Houthi movement in Yemen, which is aligned with Iran, announced a naval blockade targeting Saudi Arabia, according to their military spokesperson.
Sealing off this southern entry point to the Red Sea would eliminate a vital alternative path for Saudi Arabia, bypassing the Strait of Hormuz, thereby heightening concerns about potential supply shortfalls.
“After oil prices moved higher on escalating US-Iran tensions last week and the resulting slowdown in Hormuz transits, traders are watching for catalysts that would justify a further rally,” said Richard Bronze of consultancy Energy Aspects.
“The Houthis resuming maritime attacks and effectively shutting the Bab el-Mandeb would certainly qualify.”
Following the Houthi declaration, oil prices saw a modest increase of under one percent, settling near $89 per barrel. Earlier, expectations of renewed peace discussions between Iran and the United States had put downward pressure on prices. This year, oil futures have reached a high of $126, which remains below the record peak of $147 set in 2008.
Connecting the Red Sea and the Gulf of Aden, the Bab el-Mandeb serves as an essential conduit for crude oil and fuel shipments traveling among the Middle East, Europe, and Asia. Since Houthi assaults on maritime traffic commenced in 2023, numerous ships have already opted for longer voyages around Africa, leading to increased expenses and extended delivery times for international commerce.
A complete shutdown would most significantly and immediately affect Saudi crude oil exports originating from Yanbu, a Red Sea port. According to Matt Smith, Kpler’s commodity research director, Asian refineries importing these shipments might experience delays of approximately one month, as tankers would be compelled to navigate
“The impact is going to be massive in the first month,” Smith said. “The biggest impact is going to be on Saudi flows.”
Such a disruption would inevitably lead to logistical challenges, given that very large crude carriers (VLCCs) cannot pass through the Suez Canal when fully laden, and the capacity of Egypt’s SUMED pipeline, connecting the Red Sea and the Mediterranean, is finite.
Data from Kpler indicates that Saudi Arabia has, on average, exported more than 4.5 million barrels per day of crude oil and fuel from Yanbu since April, with roughly 70 percent of these shipments destined for Asia.
John Paisie, president of Stratas Advisors consultancy, stated that the repercussions would reach well beyond just the oil markets.
“If they really stop and severely hinder those barrels through the Red Sea, that is going to have an impact on oil prices as well as refined product prices,” he said. “It undermines the whole global economy. At some point, you could have a global recession.”
Analysts anticipate that the immediate response in the oil market would probably be a further escalation in crude prices, as refineries vie for existing supplies. Paisie suggested that oil prices might re-ascend past $115-$120 per barrel, simultaneously increasing freight and insurance expenses due to vessels undertaking extended journeys around the African continent.
European refining margins for diesel reached an unprecedented high exceeding $65 per barrel on Friday, maintaining a similar level into Monday. Deliveries of diesel and jet fuel from Asian and Middle Eastern
