The risk of a renewed Red Sea shipping crisis has escalated as Iran reportedly primes Yemen’s Houthis to close the Bab el-Mandeb Strait, threatening to choke a critical chokepoint for global oil and container trade.
Three sources told Reuters that the proposal has been discussed by Iran’s leadership and conveyed to the Houthis. A source close to the Yemeni group claimed missiles and drones have already been deployed near the strategic waterway, and the group is awaiting an order to begin targeting shipping, according to Splash247.
Oil Export Chokepoint
With the Strait of Hormuz already effectively shut, Bab el-Mandeb has become the principal release valve for Gulf oil exports, particularly for Saudi Arabia. Riyadh has increasingly relied on its East-West Pipeline to move crude from the Gulf coast to Yanbu on the Red Sea, bypassing Hormuz. Shipping analysts at Scandinavian bank SEB said Saudi exports through Yanbu are currently running at between 4m and 4.5m barrels per day, close to the practical limits of the pipeline’s export capacity. “The Red Sea matters here because it is currently the release valve for Hormuz,” SEB noted.
Those barrels must pass through Bab el-Mandeb to reach Asian buyers. If the Houthis resume attacks or attempt to close the strait, Saudi Arabia would lose its direct eastern route at the same time as Hormuz remains inaccessible.
The crude would not be completely stranded. Cargoes could move north through the Suez Canal and SUMED pipeline into the Mediterranean before continuing towards the Atlantic or sailing around the Cape of Good Hope. However, the alternative is highly inefficient. Fully laden VLCCs cannot transit the Suez Canal, meaning cargoes would need to be partially discharged at Ain Sukhna, moved through SUMED and reloaded at Sidi Kerir.
Freight Rate Implications
SEB expects tanker rates to spike initially as the market prices in the longer voyages, operational complexity and reduced effective vessel supply. Over time, however, the effect could reverse. A prolonged closure would likely send oil prices sharply higher, eventually curbing consumption and reducing cargo volumes. Against a growing tanker fleet, that could leave the market oversupplied and pull freight rates lower.
The wider shipping impact would extend far beyond oil. Bab el-Mandeb is the southern gateway to the Red Sea and Suez Canal, carrying containerised goods, dry bulk commodities and energy cargoes between Asia and Europe. During the Houthi campaign that began in late 2023, most major shipping lines rerouted vessels around southern Africa, adding thousands of miles to voyages and driving up freight costs, fuel consumption and insurance premiums.
A renewed campaign would almost certainly accelerate diversions around the Cape of Good Hope and delay hopes for a broader return to the Red Sea.
Geopolitical Context
The threat is underlined by the collapse of a four-year truce between Saudi Arabia and the Houthis, with the group firing missiles at the kingdom after accusing Riyadh of attacking a Houthi-controlled airport, according to Splash247.
Watch List
- US-Iran tensions: Any US military action against Iranian power infrastructure could trigger the Houthi response.
- Saudi-Houthi truce: Further breakdown could lead to immediate attacks on shipping.
- Tanker market dynamics: SEB’s analysis suggests initial rate spikes may give way to oversupply if oil demand falls.
- Container lines: Expect continued Cape of Good Hope diversions; any return to Red Sea transit delayed.
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