The armed conflict in the Middle East entered a new, more critical phase when the Houthis in Yemen declared a maritime blockade against Saudi Arabia. This sudden announcement has the potential to involve the strategic Bab el-Mandeb Strait, thus threatening the flow of global oil exports amid the ongoing crisis between the United States and Iran.
The declaration of the blockade by the Houthis coincided with the actions of the US military through the Central Command (CENTCOM) which launched the latest series of air strikes on Iranian military facilities and missile launch sites. At the same time, Iran intercepted and attacked a tanker in the Strait of Hormuz, in addition to launching a rocket attack that damaged a water plant in Kuwait.
This latest threat to Saudi Arabia puts around 2.5 million barrels of oil exports per day at risk, especially when shipping traffic in the Strait of Hormuz has stopped. This situation has forced the market to rely heavily on the East-West pipeline network (Petroline) and the Red Sea terminals to maintain the world's energy supply chain.
Despite the escalating fighting, there has been a glimmer of diplomacy following reports that regional mediators have proposed a 10-day ceasefire to Washington and Tehran. The proposal is aimed at restoring a memorandum of understanding signed last month to end the fighting and reopen sea trade routes.
Global energy markets reacted volatilely to the geopolitical developments, with Brent crude surging above $90 a barrel while WTI strengthened to $84.13. Analysts have warned that failure to reach a peace deal could trigger higher oil prices in the near future.
