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[Escalating Tensions in the Red Sea Exacerbate Global Oil Supply Concerns] ⑴ Houthi rebels in Yemen seized the islands of Hanish and Ghanish in the southern Red Sea following an attack on a Saudi pipeline, fueling market concerns about a new global oil supply crisis. ⑵ Brent crude rose about 1% on Tuesday morning to around $107 a barrel, while the average price of U.S. diesel exceeded $6 a gallon for the first time last week. The war and Ukraine's attacks on Russian refineries further compressed global supply. ⑶ The war with Iran has forced Saudi Arabia to shift exports to the Red Sea, as Iranian attacks disrupted shipping in the Strait of Hormuz. Saudi Arabia relies on a 1,200-kilometer-long east-west pipeline to transport crude oil from Gulf ports to the Red Sea port of Yanbu. ⑷ However, Saudi authorities shut down the pipeline after Thursday's attack, which Saudi Arabia blamed on Iranian-backed militia drones in Iraq. Officials said repairs, including to major pumping stations, could take three to five weeks, during which time the pipeline may operate partially. (5) Some research institutions have analyzed that the pipeline has been transporting an average of 2.6 million to 4 million barrels per day since the end of August. A complete shutdown would remove this portion of supply from the market, and a long-term closure would require a significant reallocation of global crude oil flows. (6) The Houthi-held islands of Hanish and Bab el-Mandeb are located about 160 kilometers north of the Bab el-Mandeb Strait, which connects the Red Sea to the open ocean and is a vital choke point for Saudi Arabia to access key Asian markets. Their advance has also brought them to within about 20 miles of the US military base in Djibouti. (7) For more than a month, the Houthi forces have continued to attack Saudi oil infrastructure and Red Sea shipping, pushing up global oil prices and increasing Iran's leverage in its war with the United States. (8) The Houthi advance appears to have encountered little resistance from the Saudi-backed Yemeni government forces. Last week, they also captured the port cities of Mocha and Maiyun Island in the Bab el-Mandeb Strait. Government forces are attempting to regroup and launch airstrikes against Houthi positions. (9) The Houthi rebels claimed to have fired dozens of missiles and drones at the King Khalid Air Base in southern Saudi Arabia. The Saudi military stated that the attack hit civilian areas, injuring 13 civilians, but did not specify whether the air base was hit. (10) Data from the International Energy Agency shows that the war with Iran has severely damaged Saudi oil production, which fell to 6 million barrels per day in August, down from nearly 10 million barrels per day in September of last year. (11) The fighting in the Red Sea and Yemen risks plunging the country back into a full-blown civil war. The World Health Organization stated that more than 500 people died in Yemen last week alone, and the fighting has displaced nearly 94,000 people. (12) An Iranian Foreign Ministry spokesperson stated that Saudi Arabia requested the temporary cancellation of a meeting scheduled to be hosted by Oman to discuss the Strait of Hormuz, and that an agreement between Iran and Oman on the strait had been finalized. Gulf officials stated that Saudi Arabia submitted amendments to the agreement, fearing it would be detrimental to other Gulf Cooperation Council (GCC) countries.