Saudi Arabia sends millions of barrels of oil through the Red Sea every day because the Persian Gulf is largely blocked. It is precisely this alternative route that Iran is now threatening to close.
• Alternative supply route cushions traffic disruption in the Strait of Hormuz
• Iran threatens to close this transport route
• Oil prices could rise further if the Bab al-Mandab road is closed
The oil market has been struggling with a largely closed Strait of Hormuz for almost 100 days. Saudi Arabia then redirected its oil exports via the east-west pipeline to the Red Sea to cushion the loss. Flows through the Bab al-Mandab Strait have since almost doubled to 7.2 million barrels a day, up from 3.9 million barrels a day in February, before the US-Israeli attack on Iran. Now it is precisely this alternative route that is becoming the focus of the next escalation risk.
Iran threatens to close alternative supply route
Iran’s Revolutionary Guard threatened to close Bab al-Mandab Street if Israel did not stop its attacks on Gaza and Lebanon. The consequence would be immediate: the Saudi barrels currently on their way to Asia would be cut off. Matt Smith, commodities analyst at Kpler, sees this as the next level of escalation with significant market impact, according to CNBC. The flow through the Red Sea is one of the factors that have so far prevented prices from rising even further.
As ABC News reports, analysts at the US investment bank JPMorgan estimated the possible increase in oil prices due to problems on the Bab al-Mandab Strait at up to 20 US dollars per barrel as early as the end of March 2026. If both straits, Hormuz and Bab al-Mandab, remain closed for a longer period of time, prices between 150 and 200 US dollars per barrel would also be possible.
Houthis as a sleeping reserve
Iran’s Yemeni allies, the Houthis, have so far largely stayed out of the current conflict. According to Smith, in order to disrupt traffic through the Bab al-Mandab, they wouldn’t even need to change that completely: targeted attacks on individual ships would be enough to bring tanker traffic through the strait to a standstill. Traders are already monitoring signals from Iranian state media and the Houthis that indicate a restriction on access to the road.
This would mean the closure of Bab al-Mandab Street
Higher oil prices would primarily benefit oil producers who produce outside the two affected straits. US producers from the Permian Basin, but also North Sea production, would be beneficiaries in such a scenario. Energy analysts warn that a simultaneous closure of Hormuz and Bab el-Mandeb would block up to a quarter of global oil and gas supplies, with consequent consequences for inflation and global growth.
For investors beyond the energy sector, this means that rising energy prices are putting a disproportionate burden on companies with high transport costs, from airlines to the chemical industry. Whether the escalation comes or doesn’t happen in the next few days depends largely on one point: the fragile ceasefire between Israel and Lebanon. If the ceasefire breaks down in the next few days, Iran’s threat could become reality.
Benedict Kurschat, editorial team at finanzen.net
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