With Iran’s effective closure of the Strait of Hormuz forcing Saudi Arabia to reroute millions of barrels through its only alternative export terminal, the world’s oil supply now funnels through a second vulnerable chokepoint where Yemen’s Houthi militants sit within striking distance.

The Bab al-Mandab Strait, a narrow Red Sea passage accounting for roughly 6 percent of global seaborne oil trade, has become the single point of failure for the workaround keeping crude flowing after Hormuz went dark. If the Houthis act on their repeated threats to join Iran’s war, the disruption could exceed what markets have already priced in.

Since the war began on February 28, Saudi Arabia has been pushing crude westward through its East-West pipeline to the Red Sea port of Yanbu. That pipeline is the kingdom’s only remaining export route now that the Persian Gulf is effectively shut. Tankers picking up Saudi crude at Yanbu must then transit the Bab al-Mandab to reach global buyers. As OilPrice.com reported, this rerouting has relieved some pressure from the Hormuz closure, but it has also concentrated an extraordinary volume of oil traffic into a corridor the Houthis have attacked before.

A Backup Plan With a Fatal Flaw

Gregory Brew, a historian of Iranian oil and senior analyst at the Eurasia Group, laid out the arithmetic plainly. “There’s a large number of tankers that are now making the Red Sea transit to pick up crude” from Yanbu, he said, calling the route “very important for oil markets because it relieves pressure from the total shutting of the Persian Gulf.”

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But Brew also identified the vulnerability embedded in that relief:

“But if the Huthis attacked Yanbu and if they did enough to disrupt exports from the terminal, then you’re looking at a disruption of 7 million barrels per day.”

Seven million barrels a day. That figure dwarfs any single supply disruption in modern oil-market history. It would mean not just a partial squeeze but a near-total shutdown of Saudi export capacity at a moment when global inventories are already strained. The downstream consequences for energy prices, inflation expectations, and monetary policy would be severe and immediate.

The Washington Times reported that the East-West pipeline is already pumping at its full 7-million-barrel-per-day capacity, with Yanbu exports reaching 5 million barrels per day. That confirms Yanbu is not a marginal backup. It is the main artery now.

The Houthis’ Calculated Restraint

So far the Houthis have not formally joined the war. But their rhetoric leaves little room for comfort. In a televised speech on March 5, Houthi leader Abdul Malik al-Huthi said: “Regarding military escalation and action, our fingers are on the trigger at any moment should developments warrant it.”

A week later, on March 12, Iran’s semiofficial Fars news agency reported that the Houthis were on full alert and could join Tehran’s war effort, warning that their involvement could lead to closure of the Bab al-Mandab Strait. The messaging has been consistent and deliberate.

Ahmed Nagi, a senior analyst for Yemen at the Brussels-based International Crisis Group, described the Houthis’ posture as strategic timing rather than reluctance:

“Rather than activating all fronts at once, Iran appears to be managing escalation gradually and keeping the Huthis in reserve. In this sense, the Huthis function as an important card that can be played later, especially given their ability to disrupt Red Sea shipping and create wider economic and security pressure.”

Nagi added that “if the military pressure on Iran increases or the war enters a more critical phase, the Huthis could still jump in despite the potential costs on their domestic front in Yemen.” His assessment: “Their current restraint therefore looks more like timing than reluctance to get involved.”

That framing matters for markets. A group that is waiting for the optimal moment to strike is not the same as a group that has decided to stay out. The Houthis are a US-designated terrorist organization with a track record of attacking international shipping in the Red Sea and Bab al-Mandab. They have previously launched missile and drone attacks on Israel. The capacity is established. The question is when, not whether, the trigger conditions arrive.

As we detailed in our coverage of how ceasefire hopes collided with fine print, markets have repeatedly whipsawed on Middle East headlines. Each time, the underlying risk has proved stickier than the optimism.

Iran’s Escalation Ladder

The threat is not limited to the Houthis acting independently. Iran itself has signaled willingness to weaponize the Bab al-Mandab. Islamic Revolutionary Guard Corps sources told Tasnim News Agency, as the New York Post reported, that Iran could “open other fronts” if the US escalates with land or naval action. An IRGC source stated bluntly: “The Bab al-Mandab Strait is considered one of the world’s strategic straits, and Iran has both the will and the ability to create a completely credible threat against it.”

Approximately $1 trillion worth of goods pass through the Red Sea each year. The US Energy Information Administration puts the Bab al-Mandab’s share of global seaborne oil trade at around 6 percent. Those figures predate the rerouting of Saudi crude to Yanbu, which has almost certainly pushed the strait’s current share of oil transit higher.

One regional analyst quoted by the Washington Times, Maher Abu al-Majd, described the pattern: “What we are seeing is Iran running this conflict in phases, its own capabilities first, then Hezbollah and the Iraqi factions, now the Houthis and the threat to Red Sea navigation.” The phased approach means each escalation step carries a new supply risk that markets have not fully absorbed.

The physical oil market has already shown signs of stress beyond what headline futures prices suggest. As we reported when physical crude hit $147 while futures stalled below $100, the gap between paper and physical prices has been one of the clearest signals that actual supply is tighter than screen prices imply.

Why the Ceasefire Framework Leaves a Gap

A critical detail: the Houthis were not included in the Pakistan-brokered US-Iran ceasefire framework. They signed a separate cease-fire deal with the United States in May 2025, but that agreement predates the current war and does not bind them to the terms of any new arrangement between Washington and Tehran.

Newsmax reported that a Houthi leader told Reuters the group is “fully militarily ready with all options.” A separate source, Amr Al-Bidh, told Reuters: “When they see Iran is needing them the most then they will move.” The implication is that the Houthis view their intervention as a question of timing and leverage, not principle.

Brew offered a counterweight to the most alarming scenarios. He noted that US and Israeli air strikes in recent years “did real damage to the Huthis’ position in Yemen” and that “they’re struggling to pay their fighters.” He said the Houthis’ fiscal and military situation would discourage them from engaging in large-scale hostilities. That assessment suggests the group’s bark may exceed its bite in the near term.

But “discouraged” is not the same as “unable.” And the Houthis do not need to destroy Yanbu to move markets. Even a credible threat, a single missile strike on a tanker in the Bab al-Mandab, or a drone swarm aimed at port infrastructure, could trigger the kind of insurance-premium spike and shipping reroute that compounds an already tight supply picture.

The downstream consequences of sustained oil disruption are already visible in the real economy. As we covered when fuel rationing spread across Asia and Europe, the pain from supply loss does not stay confined to energy markets. It bleeds into transport costs, food prices, and consumer inflation in ways that force central banks into impossible choices.

What This Means for Gold and Hard Assets

For metals investors, the Bab al-Mandab risk is not an oil story alone. It is a story about the fragility of the global supply architecture and the second-order effects that flow from it.

A sustained disruption at Bab al-Mandab would amplify inflationary pressure at a time when central banks are already navigating between growth concerns and price stability. Higher energy costs feed directly into headline inflation, which in turn affects real yields, the single most important variable for gold pricing over the medium term. If real yields compress because inflation runs hotter than nominal rates can follow, bullion benefits.

There is also the safe-haven channel. Each escalation step in the Middle East widens the distribution of possible outcomes. When the tail risks get fatter, capital moves toward assets that do not depend on counterparty performance or supply-chain continuity. Physical gold and silver sit at the top of that list.

The Washington Examiner noted that earlier Houthi attacks on Red Sea shipping had already pushed Brent above $80 and forced major shippers including Maersk, BP, Hapag-Lloyd, and Equinor to reroute vessels around the Cape of Good Hope. ING analysts said at the time that “risks are unlikely to disappear anytime soon amid intensified incidents.” The current situation is materially worse, because the Hormuz closure has eliminated the alternative.

The broader macro picture is sobering. As the IMF warned when slashing its global growth forecast, the Iran conflict carries recession-level risk for the world economy if energy disruptions persist. For investors focused on capital preservation, the question is not whether oil volatility will affect portfolios. It is whether portfolios are positioned for the scenario where both major Middle Eastern chokepoints are compromised simultaneously.

Key risk factors to watch:

  • Any Houthi military action against Red Sea shipping or the Yanbu terminal
  • Iranian IRGC statements escalating threats to Bab al-Mandab
  • Changes in insurance premiums for Red Sea tanker transit
  • Physical-versus-futures oil price divergence as a stress indicator
  • Central bank rhetoric on energy-driven inflation and rate paths

Hezbollah has already opened a second front by firing rockets and drones into Israel, drawing Israeli ground troops into Lebanon. The Houthis represent a potential third front with direct implications for energy supply. Iran’s escalation ladder has rungs left to climb.

The market is pricing a war with one chokepoint closed. The real risk is a war with two.