Geopolitical tensions in the Middle East have escalated sharply, leading to a significant surge in global oil prices.
Iran-backed Houthi forces declared on Monday a comprehensive ban on Israeli vessels entering the Red Sea, a move that threatens a crucial shipping route circumventing the Strait of Hormuz. The announcement triggered a jump in international oil benchmarks of nearly 5%.
In an official statement, the Houthis declared they consider all enemy maritime activity a legitimate military target. This development occurs as the regional conflict enters its fourth month, further threatening a fragile ceasefire and complicating prospects for peace negotiations.
The conflict has severely impacted the Strait of Hormuz, forcing major Middle Eastern exporters to seek alternative routes to global markets. Since late 2023, the Houthis have targeted commercial ships in the Red Sea in retaliation for the war in Gaza, often using a broad definition of vessels linked to Israel, which has disrupted traffic and affected numerous ships.
Focus Shifts to the Bab el-Mandeb Strait
While not directly involved in recent military actions, the Houthis have repeatedly warned they could blockade the Bab el-Mandeb Strait, a narrow chokepoint connecting the Red Sea and the Gulf of Aden to the Indian Ocean. With oil exports via the Strait of Hormuz plummeting due to attacks, the Bab el-Mandeb has become a vital conduit for supplies.
Following the disruption at Hormuz, Saudi Arabia significantly increased flows through its East-West Pipeline, redirecting millions of barrels of crude daily to the Red Sea for shipment to Asia via the Bab el-Mandeb Strait, helping to fill supply gaps for major economies like Japan and South Korea.
Data from Kpler shows seaborne exports of crude and refined products via the Bab el-Mandeb nearly doubled to 7.2 million barrels per day in April, up from 3.9 million barrels per day in February, prior to recent escalations.
Iran's Islamic Revolutionary Guard Corps threatened last week to close the Bab el-Mandeb Strait if Israel does not halt its military actions. Matt Smith, Head of Commodities Research at Kpler, stated that an Iranian closure would sever Saudi crude supplies to Asia, representing a major escalation with severe market impacts. He noted that Red Sea oil flows have been a key factor in capping price spikes.
Smith added that the Houthis would not need to attack every passing tanker to disrupt traffic; precise strikes on select targets would be sufficient to deter shipping.
At the time of reporting, West Texas Intermediate (WTI) crude was up 4.77% to $94.86 per barrel, while Brent crude rose 4.73% to $97.49 per barrel.
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