Two chokepoints, one crisis
The Strait of Hormuz and the Red Sea are both under threat. Attacks by Iran-backed Houthi rebels have now reached the Bab el-Mandeb strait, which handles nearly 2.5 million barrels of Saudi oil a day. This follows weeks of attacks by Iran and the US in the Gulf. The dual conflicts are creating a new layer of instability for global energy markets. While the Strait of Hormuz remains a focal point, the Red Sea is quickly becoming another critical flashpoint.
Analysts warn the dual threats could force oil prices to climb sharply. The Red Sea route had been a partial solution for Gulf oil exports as the Strait of Hormuz remained effectively closed. Now that route is under pressure too. This compounding problem means that the global oil sector is facing two major disruptions at the same time. Experts are watching closely to see how long the blockades might last and what effect they will have on supply chains.
Escalation in the Red Sea
On July 22, the Houthi rebels claimed responsibility for attacks on two Saudi oil tankers. This marks their direct entry into the conflict. The attacks on the tankers were part of a broader escalation in the region and sent shockwaves through the oil market. The Houthi actions were seen as a direct challenge to Saudi exports and an effort to limit Gulf oil shipments. In response to the growing threat, the United States conducted its 12th night of strikes in Iran, targeting missile and drone storage facilities and air defense systems.
The Houthi presence in the Red Sea is a growing concern. Rystad Energy analyst Jorge Leon warned that a full blockade here would hit oil markets hard. The Red Sea route allowed 6.8 million barrels of crude to flow each day, nearly half of normal volumes through the Strait of Hormuz. Analysts are particularly worried about the vulnerability of the Bab el-Mandeb strait, which is now at the heart of the conflict. If the Houthi rebels manage to fully shut down the Red Sea route, it could further strain global oil supply and push prices even higher.
Pump prices already ticking up
In the US, gas prices rose to $4.09 a gallon last week, up from $3.92 the previous month. Germany saw a jump to nearly €2.15 a liter, a 33-cent increase in a short span. These rises are already impacting consumers and businesses, with noticeable price hikes in other parts of the world as well. Countries like Pakistan and the Philippines have also seen noticeable price increases, reflecting the broader global impact of the oil crisis. India remains somewhat insulated for now, as national oil companies absorb the added costs to protect domestic consumers.
Trump said prices would drop with time, but analysts like June Goh warned that the US may have to impose export curbs to protect domestic markets. Emergency oil reserves are now nearly used up, which means filling them again could cost more and send prices higher. These emergency measures, which were used in the early stages of the crisis, are no longer viable in the current environment. With strategic oil reserves depleted, the cost of restocking at current price levels is expected to be a major factor in future price dynamics. Analysts are warning that without significant changes in the region, fuel prices may remain elevated for the foreseeable future.