Houthis Close Key Oil Trade Route as Global Energy Supplies Hang in Balance

Iran's Parliament Speaker Mohammad Baqer Ghalibaf has issued a stark ultimatum, warning that if American forces are not removed from the region, no infrastructure will be safe. This threat was swiftly followed by action as the Houthis, who are allied with Iran, closed the Bab el-Mandeb Strait on the Red Sea.

The strait connects the Red Sea to the Gulf of Arabia and is a vital trade route for Saudi oil exports. The disruption of the Strait of Hormuz has already severely limited shipping out of the Persian Gulf, making this second choke point even more crucial. According to the Associated Press, over 7 million barrels of petroleum were transported through Bab el-Mandeb in June.

Thailand, the Philippines, and Vietnam will be among the countries most affected by this disruption, as they rely heavily on oil imports from the Middle East. International oil prices have surged sharply, with Brent crude breaking past $100 per barrel and West Texas Intermediate (WTI) jumping to nearly $92 a barrel.

Market analysts warn that if the dual blockades persist through the quarter, a global economic slowdown or recession is possible. Goldman Sachs predicts that Brent might exceed $120 a barrel in the fourth quarter and average $100 next year if the Strait of Hormuz remains disrupted through 2027.