Geopolitical tensions in the Middle East are causing significant disruptions across critical oil chokepoints, notably the Strait of Hormuz and the Bab el-Mandeb Strait. The Strait of Hormuz has experienced a standstill in traffic following a tanker reporting a projectile strike, raising fears for global oil supply. This comes amidst a wider conflict involving the US and Iran, with President Trump confirming $37.5 billion spent on the war and requesting an additional $70 billion from Congress.
Meanwhile, the Bab el-Mandeb Strait faces a new threat from Yemen's Iran-aligned Houthis, who announced a naval blockade on Saudi-linked shipping. This has already impacted two oil tankers carrying Saudi crude to Asia, which reversed course in the Red Sea. Historically, Saudi Arabia has piped oil to Yanbu on the Red Sea to bypass Hormuz disruptions, but a Houthi closure of Bab el-Mandeb would severely limit exports, potentially trapping most of Saudi Arabia's oil.
Oil prices have surged in response to these developments, with Brent crude rising over 2% to above $91 a barrel and US gasoline surpassing $4 a gallon. The Bab el-Mandeb is a crucial passage, with over 7 million barrels of petroleum transiting monthly, and its full closure would force rerouting around the Cape of Good Hope, adding weeks to voyages and increasing costs. While Saudi Arabia has alternative routes via the SUMED pipeline and Suez Canal, a dual disruption of both Hormuz and Bab el-Mandeb would profoundly impact global energy markets.
