The ongoing conflict in the Middle East has once again cast a spotlight on the region's oil supply, with a potential new front emerging in the Bab al-Mandeb strait. This narrow waterway, located between Saudi Arabia and Djibouti, is a critical transit point for a significant portion of the world's oil supply. While it may not be as crucial as the Strait of Hormuz, which handles 20 million barrels of oil daily, the Bab al-Mandeb still plays a vital role in global trade, handling around 6.2 million barrels of oil per day.
The Houthis, Iran's proxies in Yemen, have threatened to block the Bab al-Mandeb, which could have far-reaching consequences for the oil market. An effective blockade would disrupt the flow of oil from Saudi Arabia to the Red Sea port of Yanbu, which has been a crucial alternative route during the conflict. This disruption could lead to a significant increase in oil prices, with estimates suggesting a rise of $5 to $10 per barrel, pushing prices above $100.
The impact of a Bab al-Mandeb blockade would extend beyond oil prices. It would also affect the supply of diesel to Europe, which relies on Saudi Arabia for a significant portion of its fuel. The Houthis' threat has already caused some ships to abandon their plans to exit the Red Sea, and the situation is further complicated by the US military's involvement in blockading Iranian ports and the Strait of Hormuz.
The US Navy's efforts to ensure the safe transit of oil through the Strait of Hormuz have been met with challenges, as Iran has struck multiple oil tankers, reducing traffic to just a handful of crossings per day. If the US military becomes involved in the Bab al-Mandeb conflict, it could further strain their resources and ability to protect oil shipments.
The situation in the Bab al-Mandeb raises important questions about the security of global oil supply and the potential for further escalation in the Middle East. As the region continues to be a flashpoint for conflict, the world must carefully consider the implications of any military intervention and its impact on the global economy.
