Yemen Escalation Raises New Risks for Global Oil Markets
A conflict that has simmered in Yemen for years has flared in recent weeks, with consequences that could reach far beyond the Middle East. The Houthi rebels have seized nearly all of Yemen’s Red Sea coastline, giving the Iran-aligned militant group control of the Bab al-Mandab Strait, a key chokepoint for global trade. The Houthis have also intensified attacks on energy facilities in Saudi…
Conflict in Yemen has escalated recently, raising new risks for global oil markets. Houthi rebels, aligned with Iran, have taken control of Yemen's Red Sea coastline, including Bab al-Mandab Strait, a vital shipping lane. This has forced Saudi Arabia to temporarily shut down a crucial oil pipeline after a drone attack, blamed on a pro-Iranian militia in Iraq.
The conflict's impact on oil prices is undeniable, with global prices surging to $110 per barrel on September 15 before slightly declining. Experts warn that a prolonged shutdown of Saudi Arabia's East-West pipeline, which transports about 6 percent of global seaborne-traded oil, or a Houthi attempt to block the Bab al-Mandab Strait, could trigger global oil market shocks.
Even before the recent escalation, energy markets were disrupted by the Iran war, which effectively closed the Strait of Hormuz, another crucial oil artery. While the main fighting in Yemen's civil war has ceased since late February, sporadic strikes between Iran and the United States, including on shipping, persist. Analysts predict that global oil prices could reach $120 per barrel if the Iran and Yemen conflicts continue.
The United States has pleaded for military support from President Trump, but he has reportedly declined. The Houthis have agreed to a cease-fire with Washington, promising not to block the Bab al-Mandab Strait or attack international shipping in the Red Sea, except for Saudi vessels. US officials met with Houthi leaders in Oman on September 15.
The situation in Yemen presents a significant challenge for Saudi Arabia, which has been supporting the internationally recognized government since 2015. The damage to the East-West pipeline, a vital alternative route for oil exports, has strained the kingdom's oil exports. The world risks losing around 120 million barrels of oil if the pipeline remains offline for a month.
Analysts emphasize that the convergence of these catastrophic scenarios poses a dire threat to Saudi Arabia, alongside the already closed Strait of Hormuz and the damaged East-West pipeline.
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