Yemen's Houthi forces have declared a naval blockade on Saudi Arabia's Red Sea ports, escalating the regional conflict and threatening the flow of over 4 million barrels per day of Saudi crude that Riyadh had rerouted from the Strait of Hormuz. The move significantly undermines the market's hope for a de-escalation in oil supply disruptions and is being closely watched by traders and analysts as a potential catalyst for a renewed price surge. The blockade declaration came at a particularly sensitive moment for global oil markets.
Following the reignition of hostilities between the United States and Iran, Saudi Arabia had redirected crude exports away from the Strait of Hormuz toward Red Sea ports as a workaround to keep supply flowing. That rerouting had helped calm trader fears of a broader oil shortage. The Houthi blockade now puts that arrangement in jeopardy.
Richard Bronze, co-founder and executive director of Energy Aspects, commented this week as quoted by Reuters: "After oil prices moved higher on escalating U.S.-Iran tensions last week and the resulting slowdown in Hormuz transits, traders are watching for catalysts that would justify a further rally. The Houthis resuming maritime attacks and effectively shutting the Bab el-Mandeb would certainly qualify." Analysts at ING's commodity research team reported that several tankers have already altered their course to avoid transiting the Bab el-Mandeb Strait. Warren Patterson and Ewa Manthey wrote that this development "would force tankers to enter and exit the Red Sea via the Suez Canal, adding significant time and expense to voyages to Asia." According to Reuters, more than 7 million barrels per day typically transit the Bab el-Mandeb Strait.
While that figure is smaller than the approximately 20 million barrels per day that passed through the Strait of Hormuz before the current conflict, the strategic importance of Bab el-Mandeb has grown considerably given that the Hormuz route has been effectively disrupted. For Asian importers dependent on Middle Eastern crude, the Red Sea chokepoint has become a critical supply artery. Kpler commodity research director Matt Smith told Reuters: "The impact is going to be massive in the first month.
The biggest impact is going to be on Saudi flows." Stratas Advisors president John Paisie warned of broader macroeconomic consequences, stating: "If they really stop and severely hinder those barrels through the Red Sea, that is going to have an impact on oil prices as well as refined product prices. It undermines the whole global economy. At some point, you could have a global recession." Saxo Bank, citing Bloomberg data, reported last week that crude oil prices had surged by as much as 65% year-to-date.
Over the twelve months to July, both Brent crude and West Texas Intermediate are up by more than 50%, according to the same source. The supply risks extend beyond the Middle East. ING's Patterson and Manthey noted in a research note that Russia's CPC terminal in the Black Sea has stopped receiving crude from Kazakhstan, with loadings suspended following ongoing attacks on tankers.
Kazakhstan had been shipping 1.7 million barrels per day via the CPC pipeline. The analysts warned that "the longer the suspension drags on, the greater the likelihood that Kazakhstan will be forced to curb upstream production." These simultaneous disruptions across multiple critical chokepoints are compounding what is already a tight supply environment. Governments globally have released several hundred million barrels from strategic petroleum reserves in recent months in an effort to contain rising retail fuel prices, leaving storage levels depleted.
Replenishing those inventories will prove increasingly difficult if the supply squeeze deepens. The renewed threat to Red Sea shipping highlights the fragility of any market optimism built on the prospect of a U.S.-Iran peace settlement. As ING analysts observed, the physical reality of constrained supply may ultimately override diplomatic hopes, leaving oil markets vulnerable to further price volatility.
Source: OilPrice.com, by Irina Slav, July 22, 2026. Additional sourcing: Reuters, ING Think, Saxo Bank.
Source: oilprice.com