As the conflict between the US and Iran continues to escalate, the Houthi rebels in Yemen have announced a maritime blockade of Saudi Arabia, pushing the Bab el-Mandeb Strait to the forefront of uncertainty. As the southern gateway to the Red Sea, the strait carries approximately 7.4 million barrels of oil daily, accounting for 7% of global supply. Since the Strait of Hormuz was blocked, Saudi Arabia has relied on the port of Yanbu for its exports, but this alternative route is now facing disruption. Analysts warn that if the blockade becomes a reality, coupled with historically low global inventories, oil prices could surge to over $120, with Asian refiners bearing the brunt and the risk of a global economic recession significantly increasing.

I. Event Overview: Houthi rebels open a second front in the Iraq War

On Monday (July 20) local time, Yemen's Houthi spokesman Yahya Sarreya announced a maritime embargo against Saudi Arabia, effective immediately. The statement said this was a response to Saudi Arabia's nearly 12-year-long land, sea, and air blockade of Yemen. The Houthis stated they would enforce the blockade on an "eye for an eye" basis. This announcement comes amid escalating tensions between the US and Iran. Iran recently instructed the Houthis to close the Bab el-Mandeb Strait, the gateway to the Red Sea, if the US attacks Iran's power grid. The Houthis' latest action signifies that the Middle East conflict has extended from the Persian Gulf and the Strait of Hormuz to the Bab el-Mandeb Strait at the southern end of the Red Sea, opening a new front in the US-Iran war. The Saudi-led coalition responded immediately, stating it had begun measures to protect member state vessels' safe passage through the Bab el-Mandeb Strait and would respond "swiftly and decisively" to any threats posed by the Houthis. The Saudi Foreign Ministry issued a statement on the same day condemning the Houthis' accusations and the maritime embargo, stating it would take all necessary measures to protect its vessels in accordance with international law and the United Nations Convention on the Law of the Sea.

II. Strategic Choke Point: The Bab el-Mandeb Strait's Energy Lifeline Status

The Bab el-Mandeb Strait, connecting the Red Sea and the Gulf of Aden, is a crucial shipping route for crude oil and fuel transportation between the Middle East, Europe, and Asia. According to Kpler shipping data, approximately 7.4 million barrels of oil and petroleum products per day will pass through the Bab el-Mandeb Strait in June 2026, equivalent to about 7% of global oil supply. This figure represents a significant increase from 4.2 million barrels per day in the same period of 2025. The strategic importance of the Bab el-Mandeb Strait has become even more apparent after the Strait of Hormuz became blocked. Following the outbreak of the Iraq War, the throughput of the Strait of Hormuz plummeted from approximately 20 million barrels per day before the war to 2.7 million barrels per day. To bypass the blocked Strait of Hormuz, Saudi Aramco utilizes an east-west pipeline to transport crude oil produced in the Persian Gulf oil-producing region of eastern Saudi Arabia to the port of Yanbu on the Red Sea coast. This pipeline has a peak daily transport capacity of 7 million barrels, of which approximately 5 million barrels are exported. Data from professional institutions shows that around July 13, crude oil loadings at Yanbu Port reached an average of 4.7 million barrels per day, an increase of nearly 40% compared to 3.36 million barrels per day 10 days prior. Since June, Yanbu Port's average daily crude oil loadings have exceeded 4 million barrels, while the figure for the same period last year was only 973,000 barrels per day. Kpler data further shows that of Saudi Arabia's 5.29 million barrels of crude oil and condensate exports per day since July, as much as 75% have been shipped from Yanbu Port.

III. Chain Reaction: Asian Refiners Bear the Heaviest Blow

A complete closure of the Bab el-Mandeb Strait would have the most direct impact on Saudi crude oil exports from Yanbu. Matt Smith, Director of Commodities Research at Kpler, pointed out that Asian refiners receiving this crude oil could face delays of up to a month due to tankers being forced to detour around the Cape of Good Hope. Energy Aspects estimates that currently, over 3 million barrels of Saudi crude oil are shipped daily to Asia via the Red Sea, and these vessels may be forced to change routes, significantly extending their journeys. For example, the route from Yanbu to Ningbo-Zhoushan would increase by 129.8% after detouring around the Cape of Good Hope, potentially creating additional shipping demand for approximately 148 Very Large Crude Carriers (VLCCs). This disruption would also create severe logistical bottlenecks. Fully loaded VLCCs would be unable to pass through the Suez Canal, while Egypt's SUMED pipeline, connecting the Red Sea and the Mediterranean, is limited by its fixed transport capacity. Diesel and jet fuel transported from Asia and the Middle East to Europe also typically pass through the Bab el-Mandeb Strait.

IV. Oil Prices and Freight Rates: The Dual Pressure of Soaring Costs

Following the Houthi announcement of a blockade, the international crude oil market reacted swiftly. On July 20, Brent crude futures briefly broke through $91 per barrel. By the close of trading on July 21, Brent crude was at $89.22 per barrel, a 1.27% increase; WTI crude futures for August delivery settled at $83.23 per barrel, a 0.9% increase; and the more active WTI crude futures for September delivery settled at $82.48 per barrel. John Paisie, president of consulting firm Stratas Advisors, stated that if oil supplies are disrupted, oil prices could climb back to above $115 to $120 per barrel. Previously, crude oil futures prices reached a high of $126 this year. Some analysts also warned that if the Bab el-Mandeb Strait and the Strait of Hormuz were simultaneously effectively closed, international oil prices could soar to $200 per barrel. The shipping market is also under immense pressure. Insurance industry sources revealed that war risk premiums on the Red Sea route have risen from approximately 0.3% before the Houthi announcement to around 0.75% of the vessel's value. For a vessel worth $100 million, the insurance cost for a standard 7-day voyage has increased from approximately $300,000 to approximately $750,000. As ships need to take longer routes around Africa, freight and insurance costs will rise further.

V. Market Outlook: Global Economic Concerns Amid the Straits Crisis

Analysts point out that the immediate reaction in the oil market is likely to be another surge in crude oil prices, as refiners scramble for limited supply. European diesel refining margins soared to a record high of over $65 per barrel last Friday. More worrying is the fragile state of global oil inventories. Data from the International Energy Agency shows that observable global oil inventories evaporated by 360 million barrels between March and May alone. Although inventories rebounded slightly by 21 million barrels in June, this appears negligible in comparison. US crude oil inventories have collapsed to their lowest level since 1984. A complete closure of the Bab el-Mandeb Strait would compound the approximately 10% loss in global oil transport already caused by the obstruction of the Strait of Hormuz. The simultaneous blockage of two key shipping lanes would have an unprecedented impact on the global energy supply and trade system. Paisie warned that such a shock "will shake the entire global economy and could, to some extent, trigger a global recession." The current situation remains uncertain. The Houthi rebels have not yet clearly announced the specific scope and method of their blockade. Meanwhile, reports indicate that mediators have proposed a 10-day ceasefire to Iran, attempting to revive the memorandum of understanding reached between the US and Iran last month. The energy market is simultaneously trading two diametrically opposed scenarios: supply disruptions and a diplomatic breakthrough.

Editor's Summary

The Houthi rebels in Yemen have imposed a naval blockade on Saudi Arabia, directly threatening the Bab el-Mandeb Strait, a global energy chokepoint. Currently, 75% of Saudi Arabia's 5.29 million barrels of crude oil exports per day pass through the port of Yanbu via the Red Sea. If the strait closes, Asian refineries will face a supply delay of approximately one month, and oil prices could exceed $120 per barrel. The global energy market is facing the extreme risk of a "dual blockade" of the Strait of Hormuz and the Bab el-Mandeb Strait. However, a senior Iranian official stated that mediators have submitted a proposal to Iran to ease tensions with the United States, suggesting a 10-day ceasefire in an effort to reinstate the interim agreement reached last month. Investors need to closely monitor further developments in the Middle East.

Frequently Asked Questions

Q1: Why did the Houthis choose this time to impose a maritime blockade on Saudi Arabia? A: The Houthis stated that this action was a response to Saudi Arabia's nearly 12-year-long comprehensive land, sea, and air blockade of Yemen. Recent Saudi airstrikes on Sana'a International Airport, controlled by the Houthis, broke the four-year ceasefire. From a geopolitical perspective, Iran has instructed the Houthis to block the Bab el-Mandeb Strait when the US attacks its power grid; the Houthis' actions also reflect the spillover effects of the US-Iran conflict. Q2: How much impact will the closure of the Bab el-Mandeb Strait have on global oil supply? A: In June 2026, approximately 7.4 million barrels of oil and petroleum products pass through the Bab el-Mandeb Strait daily, equivalent to about 7% of global oil supply. If the strait is completely closed, coupled with the approximately 10% oil transport loss already caused by the obstruction of the Strait of Hormuz, global oil supply will face a severe shock. Currently, 75% of Saudi Arabia's 5.29 million barrels of crude oil exports per day pass through Yanbu Port via the Red Sea; this portion of exports will be the first to be affected. Q3: What specific impact will Asian refiners be affected? A: Asia is the main destination for Saudi Arabia's Red Sea crude oil exports, with about 70% of the crude oil from Yanbu Port destined for Asia. Kpler analysis indicates that Asian refiners receiving Yanbu crude oil may face a supply delay of about one month. If the blockade continues, Asian refiners will be forced to find alternative supply sources, competing with other buyers in a tight supply market, further pushing up oil prices. Q4: What does the increase in war risk premiums mean for the shipping market? A: War risk premiums have risen from about 0.3% to 0.75%. For a $100 million vessel, the insurance cost for a single 7-day voyage increases by about $450,000. This cost increase will force shipping companies to reassess whether to continue using the Red Sea-Suez Canal route. If large-scale detours around the Cape of Good Hope are implemented, transit time will increase by about 30%, with fuel costs and charter costs rising simultaneously. Q5: How high might international oil prices rise? A: Consulting firm Stratas Advisors predicts that oil prices could rise to over $115 to $120. Some analysts warn that if both the Bab el-Mandeb Strait and the Strait of Hormuz are closed simultaneously, oil prices could surge to $200 per barrel. Oil price movements will depend on the actual enforcement of the blockade and the progress of diplomatic negotiations. As of 09:27 Beijing time, Brent crude was trading at $88.44 per barrel.