Yemen Escalation Raises New Risks for Global Oil Markets

A sharp uptick in hostilities around Yemen has heightened global energy market anxieties by placing more of the world’s oil shipping routes under threat. Iran-aligned Houthi rebels have taken control of nearly the entire Red Sea coastline and the Bab al-Mandab Strait, a strategic choke point for tankers, while seizing the port city of Mokha and nearby islands. At the same time the group has escalated attacks against Saudi Arabia’s energy infrastructure. Riyadh responded to a drone strike it attributed to a pro-Iranian militia in Iraq by temporarily shutting its East-West pipeline, a principal alternative export route after the effective closure of the Strait of Hormuz amid the wider Iran conflict. Commodity intelligence firm Kpler estimated that a month-long outage of the pipeline could remove about 120 million barrels from global seaborne trade. Markets reacted quickly: Brent crude climbed to as high as $110 per barrel on September 15. Analysts and banks have flagged further upside risk if the two overlapping conflicts persist. Goldman Sachs told clients prices could reach $120 per barrel under continued disruption, and Eurasia Group senior analyst Gregory Brew said the combined pressure from the Saudi–Houthi and US–Iran confrontations is stressing international oil supplies. Diplomatic moves have followed the fighting. US officials met Houthi leaders in Oman on September 15, and reports indicate the Houthis gave assurances they would not obstruct the Bab al-Mandab Strait or attack international shipping in the Red Sea except for Saudi vessels. Observers note Washington is balancing those developments against ongoing clashes with Iran in the Persian Gulf and domestic political calculations, and experts such as University of Ottawa professor Thomas Juneau warn the situation converges into a set of “catastrophic scenarios” for Saudi export capacity while major regional sea routes remain under strain.