Another Hormuz: How Iran's Houthi Card In Red Sea May Torch Oil Markets

Summary

The Iran-backed Houthis in Yemen announced on Monday that they would block maritime trade with Saudi Arabia, a move that could further strain global energy markets already affected by Iran's blockade of the Strait of Hormuz. It remains unclear whether the Houthis would resume attacks on shipping as part of their proposed naval embargo on Saudi Arabia. ALSO READ: Iran Targets Amazon Data Infrastructure In Bahrain, Attacks US Military Base In Jordan The Red Sea has emerged as a vital substitute route for Gulf oil and other goods, with Hormuz already hampered. A significant disruption would result in the simultaneous closure of both of the Middle East's main oil export routes. The majority of Gulf oil and other exports were halted by Iran's partial blockage of the Strait of Hormuz following an attack by Israel and the United States on February 28, which increased prices and caused a global energy shock. In response, Saudi Arabia shifted over 70% of its regular daily petroleum exports to Yanbu, a port on the Red Sea. Ships from Yanbu travel north via the Suez Canal on their way to Europe. Bab el-Mandeb is the southern route taken by those travelling to Asia. Shipments from Yanbu have surged from about 973,000 barrels per day a year ago to around 4 million bpd in recent weeks, according to Kpler and Signal Ocean. Kpler data also showed oil volumes passing through Bab el-Mandeb rose from 4.2 million bpd to 7.4 million bpd in June, helping keep global oil prices in check. According to a report from Reuters last week, Saudi Arabia is thinking about extending its pipeline for crude oil to the Red Sea shore. Gulf oil shipments remained unaffected even after the Houthis began attacking vessels in the Red Sea in November 2023. ARE THE HOUTHIS CLOSING RED SEA ENERGY ROUTES ON IRAN'S BEHALF? In the 1990s, the Houthis became a military, political, and religious force in northern Yemen, waging guerrilla warfare against the Sanaa government. They have been engaged in a civil war with the internationally recognised government supported by Saudi Arabia for almost ten years, and they have used drones and missiles to attack Gulf neighbours. But until last week, when Yemen's internationally recognised government claimed to have attacked Sanaa airport to prevent an Iranian plane from arriving, a 2022 truce between the nation's warring factions remained largely intact. Houthis blamed Saudi Arabia, who retaliated by firing missiles at Abha airport in the mountainous southwest of the kingdom. Then, in an appearance on Iran's Press TV website, Mohammad al-Farah, a prominent Houthi leader and member of the politburo, threatened to seal Bab el-Mandeb if the situation continued to worsen. Iran supports the Houthis as part of its "Axis of Resistance" in the region, which also includes Iraqi Shi'ite militias and Hezbollah in Lebanon; however, its connections to the Yemeni movement are less obvious than those of those other groups. ALSO READ: Ceasefire And Hormuz Reopening Or Wider Conflict? Trump Faces Crucial Decision On Iran War, Says Report Unlike Hezbollah and the Iraqi parties, the Houthis do not see Iran's supreme leader as their supreme religious authority. Despite the group's ideological alignment with Iran, their aims are mostly domestic. The United States claims that Iran, with assistance from Hezbollah, has provided the Houthis with weapons, money, and training. The Houthis claim to create their own weaponry and deny being an Iranian proxy. The extent to which the group is acting on Iran's behalf or in accordance with its own geopolitical interests regarding Bab el-Mandeb and the Red Sea is unclear. Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.