With Iran's blockade of the Strait of Hormuz disrupting Middle Eastern crude exports and even the Bab el-Mandeb, the gateway to the Red Sea, coming under threat, the global oil supply chain is on high alert. Concerns are growing that if the Strait of Hormuz and the Bab el-Mandeb, the two key maritime chokepoints for global oil transport, are shaken at the same time, international oil prices could surge and the world economy could slip into recession.
According to the Wall Street Journal (WSJ) on the 17th (local time), Saudi Arabia has minimized supply disruptions since the virtual blockade of the Strait of Hormuz by transporting crude through the East-West Pipeline from eastern oil fields to Yanbu on the Red Sea coast in the west, then exporting it via the Bab el-Mandeb Strait that links the Red Sea and the Gulf of Aden.
Through this kind of rerouted export, Saudi Arabia is said to be maintaining crude exports at about 4.6 million barrels per day. Although it falls short of about 7.3 million barrels per day before the war, the use of the Red Sea route has largely offset the decline.
However, the situation is changing as reports mount that Yemen's Iran-aligned armed group, the Houthis, is preparing to blockade the Bab el-Mandeb Strait. Reuters reported that Iran, preparing for additional U.S. attacks, conveyed a message to the Houthis to prepare to block the Red Sea gateway. The Bab el-Mandeb Strait is a key global maritime route through which about 7.4 million barrels per day of crude and petroleum products pass.
Military tensions between the Houthis and Saudi Arabia are also rising again. The two sides have maintained a truce posture since 2022, but after Saudi Arabia and Yemeni government forces carried out airstrikes on Sanaa International Airport, controlled by the Houthis, the Houthis responded by launching ballistic missiles and suicide drones toward Abha International Airport in southern Saudi Arabia. With the de facto truce faltering, analysts say it has become difficult to guarantee the safety of the Red Sea route.
The market expects that if the Strait of Hormuz and the Bab el-Mandeb Strait cannot function simultaneously, the global energy market will face a shock it cannot easily absorb. The Strait of Hormuz is the largest energy corridor, with about 20% of the world's seaborne crude trade passing through it, and the Bab el-Mandeb Strait is also a key gateway connecting exports of Middle Eastern crude to Europe and North America. If the two straits are disrupted at the same time, not only would crude supply fall, but soaring ocean freight rates and war risk insurance, combined with supply chain disruptions, could further intensify global inflation and economic slowdown pressures.