Houthi attacks create second Mideast oil chokepoint
Houthi militant attacks on the Bab el-Mandeb Strait have created a second major oil chokepoint, threatening to force Saudi production cuts and severely tighten European diesel supplies.
Brent crude fell 4.4% to $96.36 and WTI dropped 3.6% to $88.86 on Friday following reports that Pakistan is attempting to broker a return to U.S.-Iran nuclear negotiations. China is strongly backing this diplomatic effort as continued closures at the Strait of Hormuz threaten its energy security. However, Standard Chartered warns this price pullback may be temporary because Middle East oil risk has structurally expanded from one strategic chokepoint to two.
Yemen's Houthi militant group imposed a targeted maritime blockade against Saudi Arabia on Monday, citing a decade-long Saudi containment of Yemen and a recent airstrike on Sanaa International Airport. The Houthis followed through on their threat on Thursday, striking two Saudi oil tankers with ballistic missiles and drones. The attacks damaged both vessels and ignited onboard fires, briefly pushing Brent crude nearly $20 higher to surpass $100 per barrel.
The physical market impact is already visible. Multiple Saudi-linked very large crude carriers (VLCCs) have abandoned planned transits through the Bab el-Mandeb Strait to reroute around Africa’s Cape of Good Hope, adding up to two weeks to each voyage. Standard Chartered estimates roughly 7 million barrels per day were transiting the waterway prior to the attacks. This volume surge followed Saudi Arabia's decision to shift 70%-75% of its crude exports through its East-West pipeline to the Red Sea port of Yanbu, bypassing the Arabian Gulf entirely.
Because fully laden VLCCs cannot pass through the Suez Canal due to draft restrictions, crude must be transferred to smaller Suezmax tankers or moved via Egypt's SUMED pipeline. Disruptions to this Red Sea corridor immediately ripple through global shipping, driving up war-risk insurance premiums, increasing freight rates, and tightening vessel availability. Standard Chartered cautions that further deterioration could force Saudi Arabia to cut crude production, as alternative routes cannot absorb the displaced capacity.
European refiners are positioned to suffer the most severe consequences. The continent is already contending with tight diesel supplies following sustained Ukrainian attacks on Russian refineries and tanker infrastructure. A compromised Bab el-Mandeb Strait would delay Middle East shipments of diesel and jet fuel by 10 to 15 days.
To rebuild inventories, European refiners will likely be forced to source incremental barrels from the U.S., West Africa, or Brazil. This would trigger a significant reshuffle in global trade flows and widen regional oil price dislocations. Standard Chartered notes that clean product tankers will be the hardest hit segment, as they rely heavily on Suez transits unlike the long-haul VLCC fleet.
