The global oil market is facing a new geopolitical risk as Iran threatens to close the Bab el-Mandeb Strait, a strategic shipping route that connects the Red Sea with the Gulf of Aden and the Arabian Sea. If tensions in the Middle East continue to escalate, the risk of oil supply disruption could become even more serious, especially as flows through the Strait of Hormuz have already been heavily affected.

Bab el-Mandeb: A Strategic Choke Point for Global Oil Trade

The Bab el-Mandeb Strait is one of the world’s most important maritime trade choke points. It connects the Red Sea with the Gulf of Aden and the Arabian Sea, playing a key role in the transportation of crude oil and energy products from the Middle East to Asia and other regions.

As oil exports through the Strait of Hormuz have declined due to Iran-linked attacks on tankers and cargo ships, Bab el-Mandeb has become an important relief valve for the oil market. In simple terms, when one major route is disrupted, the market needs another path to keep oil moving.

However, when the world depends heavily on narrow shipping routes, the risks become just as narrow and dangerous.

Saudi Arabia Increases Oil Flows Through the Red Sea

After flows through the Strait of Hormuz were disrupted, Saudi Arabia sharply increased oil shipments through its East-West Pipeline. This route allows millions of barrels of oil per day to be redirected from production areas to Red Sea ports before passing through Bab el-Mandeb on the way to Asia.

These barrels have played an important role in offsetting part of the lost supply, especially for energy-dependent economies such as Japan and South Korea.

According to data from Kpler, oil and refined product exports through Bab el-Mandeb nearly doubled, rising from around 3.9 million barrels per day in February to 7.2 million barrels per day in April. This sharp increase shows that the Red Sea route has become more important than ever for balancing global oil supply.

Why Bab el-Mandeb Matters for Oil Prices

Oil flows through the Red Sea have been one of the key factors preventing crude prices from rising even more sharply. When supplies through Hormuz are disrupted, alternative routes such as Bab el-Mandeb help the market avoid a more severe supply shock.

However, if Bab el-Mandeb also comes under threat, the market would lose another crucial shipping route. This could raise concerns about tighter supply and push oil prices higher.

U.S. crude oil prices spiked as much as 8% during Monday’s session after Iran’s threat against Bab el-Mandeb. Prices later pulled back after Israel and Lebanon agreed to implement a ceasefire, but the stability remains fragile.

Potential Impact on the Energy Market

If Bab el-Mandeb is disrupted, the oil market could face three major risks.

The first is the risk of short-term supply shortages, especially for Asian countries receiving Saudi oil through the Red Sea route.

The second is the risk of higher transportation costs, as vessels may need to use longer alternative routes. This would increase delivery times and insurance costs.

The third is the risk of stronger market sensitivity to every geopolitical headline. When supplies through Hormuz have already been affected, any threat to Bab el-Mandeb could trigger sharp price volatility.

In this environment, the oil market is not only reacting to actual supply and demand. It is also reacting to the fear of disruption. And in commodity markets, fear can sometimes be almost as expensive as the barrel of oil itself.

Conclusion

Bab el-Mandeb is becoming a major risk point for the global oil market. As flows through the Strait of Hormuz remain disrupted, Bab el-Mandeb has played an important role in keeping oil supplies moving toward Asia. However, Iran’s threat and the possible involvement of the Houthis make this route increasingly vulnerable.

If Middle East tensions continue to escalate, the oil market could experience stronger volatility in the coming period. Investors will need to closely monitor developments involving Iran, Israel, Lebanon, Yemen, and the United States, as any incident around Bab el-Mandeb could quickly turn into a broader shock for global oil prices.

At this stage, oil is no longer just a supply and demand story. It is also a story about geopolitics, shipping routes, energy security, and the market’s fragile hope that things will not get worse. A brave assumption, considering how the world usually behaves.

Source: CNBC