Houthis Blockade Chokes Global Oil Markets
The conflict in the Middle East has escalated as the Iran-aligned Houthis militia declared a naval blockade on Saudi Arabia, which could restrict oil shipments through the Bab el-Mandeb Strait.
This chokepoint connects the Red Sea to the Gulf of Aden and on to the Arabian Sea and Indian Ocean, and is narrower than the Strait of Hormuz. The blockage could have significant implications for global oil markets, with Brent crude oil futures hovering above $90/barrel.
Saudi Arabia's oil exports through the Bab El-Mandeb rose to around 4 million barrels per day from April to July, while shipments through the Strait of Hormuz fell significantly. The Suez Canal, which connects the Red Sea with the Mediterranean, can only handle smaller tankers, limiting the amount of oil that can be transported.
The Houthis' blockade is part of a broader escalation in the conflict, which has also seen Russia halt all diesel exports and the US reduce its crude exports. These developments could lead to tighter global oil markets and higher prices for consumers.