The Bab al-Mandeb strait, a vital maritime artery connecting the Red Sea to the global economy, is facing a severe security crisis. Over the past 48 hours, Iran-backed Houthi rebels have significantly escalated their control over the region, reportedly seizing the port city of Mocha and the strategic Perim Island. This escalation marks a dangerous turn in the ongoing conflict, which has already seen months of instability in the area.
This narrow waterway has served as a critical escape route for Middle Eastern oil exports, particularly after the US-Iran conflict effectively closed the Strait of Hormuz. Before the current war, the Strait of Hormuz facilitated the transit of approximately 20 million barrels of oil daily, roughly one-fifth of the global supply. With that route shuttered, Saudi Arabia shifted its crude exports to the East-to-West pipeline, utilizing the Red Sea port of Yanbu to move up to 4.5 million barrels per day, with the majority passing through the Bab al-Mandeb.
Richard Bronze, co-founder of Energy Aspects, noted that Saudi crude shipments through the strait plummeted to roughly 400,000 barrels per day in August due to Houthi threats, and current volumes have dropped even further. He described the loss of this lifeline as a stark wake-up call for the oil market regarding the current unsustainable landscape. As refineries in Asia scramble for alternative supplies, the resulting competition for oil cargoes has driven prices upward sharply.
Market reaction to the capture of these strategic locations was immediate, with Brent crude and WTI both climbing over 7% on Thursday to reach $108 and $103 per barrel, respectively—the highest levels since May. Johannes Rauball, a senior crude analyst at Kpler, attributed these price hikes to a combination of Red Sea disruptions, Saudi production cuts, and Ukrainian strikes on Russian energy infrastructure. With no clear resolution in sight, refiners are forced to secure crude at higher costs, a trend expected to persist.
The economic impact extends to diesel, the essential fuel for global freight and logistics. In the United States, diesel prices have surged more than 50% since the start of the war, hitting a record high of over $6 per gallon on Friday, according to AAA data. These rising energy costs are contributing to broader inflation, potentially triggering interest rate hikes that could further increase borrowing costs for consumers.
Shipping companies are increasingly forced to avoid the Bab al-Mandeb entirely, opting for a significantly longer route around the southern tip of Africa. This detour adds approximately one month to transit times, drastically increasing fuel, insurance, and labor expenses. Peter Sand, chief analyst at Xeneta, estimates that vessel transits through the strait have declined by 60% to 70% since the Houthi attacks on commercial shipping began in late 2023. Recent fighting has caused a further 46% drop in traffic over the last few days.
While shipping firms are accustomed to operating in high-risk environments, the current situation remains precarious. Sand noted that while he does not expect traffic to cease entirely, every vessel navigating the strait remains a potential target for the rebels. The ongoing instability continues to threaten the stability of global supply chains and energy security. The report also notes that the Houthis have dramatically tightened their grip on the shipping route, capturing both the port city of Mocha and – according to Yemeni government sources – the strategic Perim Island in the middl, in the past 48 hours. The report also notes that at its peak, around 4.5 million barrels of crude per day were exported from Yanbu, with the bulk – about 3 million barrels per day – exiting via Bab al-Mandeb, according to Bronze. The report also notes that a narrow waterway located at the mouth of the Red Sea between Yemen and Djibouti has provided an escape hatch for a sizeable chunk of the Middle East’s oil. The report also notes that that lifeline is now looking increasingly shaky. The report also notes that fueling inflation by adding delays and costs onto already-elevated shipping rates, it will also need to take much longer routes.