Source: The Conversation (Au and NZ)
On Monday, the Iran-backed Houthi rebels in Yemen announced they would impose a “maritime embargo” on Saudi Arabia, in what could mark a dangerous escalation in the ongoing conflict between the United States and Iran.
The Houthis have indicated they plan to target Saudi Arabian vessels travelling through the Bab el-Mandeb Strait, also known as the “Gate of Tears”, which connects the Red Sea and the Gulf of Aden.
This escalation threatens to have a significant impact – particularly for Saudi Arabian crude oil travelling via the Red Sea, much of which has been recently diverted there to avoid the Strait of Hormuz.
In a statement, Saudi Arabia’s foreign ministry expressed the country’s “strongest condemnation” of the threats, and said it would take “all necessary measures” to protect its ships. It is not clear how effective this approach will be.
And as we’ve seen in the past, threats alone can be enough to disrupt the flow – and cost – of shipping activities in the Red Sea.
The ‘Gate of Tears’
The Bab el-Mandeb Strait, whose name means “Gate of Tears” in Arabic, is a narrow waterway located between Yemen to the northeast and Djibouti and Eritrea to the southwest.
Together, the Bab el-Mandeb Strait, Red Sea and Suez Canal form a vital maritime channel for global shipments, connecting nations in Europe with those in Asia and the Pacific.
About 10–12% of global maritime trade passes through the Bab el-Mandeb Strait each year.
Saudi Arabia’s ‘Plan B’
This year, the Red Sea has grown even more important for global shipping – and Saudi Arabia.
Saudi Arabia is one of the world’s largest oil producers. China is the largest buyer, but other major buyers in Asia include Japan, South Korea, India and Singapore.
With severe, ongoing disruptions in the Strait of Hormuz, which normally carries about a fifth of the world’s oil and gas, Saudi Arabia has been diverting exports to the Red Sea to bypass it.
The country’s east–west oil pipeline, connecting Abqaiq in the east with Yanbu on the Red Sea, was restored to full capacity earlier this year.
The port at Yanbu now reportedly handles more than 70% of Saudi Arabia’s crude oil exports.
The bigger risk in the Red Sea
At this stage, the Houthis have only declared a blockade on Saudi Arabian ships – not a “closure” of the shipping corridor to all traffic.
If the maritime blockade via the Red Sea is expanded further to other countries, global trade for manufactured goods, retail products, electronics and machinery could be severely impacted.
To avoid the Red Sea, ships can use an alternative path around South Africa’s Cape of Good Hope. This is a much longer and more expensive route.
Possible trouble for inflation
Insurance costs for ships transiting the Strait of Hormuz have surged since the beginning of the conflict, reportedly now ranging from 3–10% of hull value (the value of a ship itself, not the cargo). That extra insurance can add millions of dollars to each shipment.
Insurance costs for ships transiting the Red Sea have reportedly already risen in the wake of the Houthis’ announcement.
Ultimately, higher insurance costs for shipping are typically passed onto end consumers. This can add to inflationary pressures around the world.
What’s on the horizon
We don’t yet know how effective a Houthi blockade on Saudi Arabia will be. Nor if the situation will escalate any further from here.
For countries around the world, this new maritime blockade has likely dimmed hopes the economic disruption from the conflict in the Middle East will be over soon.
Businesses and governments need to continue to examine their supply-chain resilience, and consider long-term alternatives for sourcing and shipments of key goods, including oil.
Moving forward, it is also important to reduce reliance on fossil fuels and continue transitioning toward renewable energy for transport, logistics and manufacturing.
Sanjoy Paul does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
Original source: https://analysis1.mil-osi.com/2026/07/21/why-new-houthi-threats-in-the-red-sea-could-spell-trouble-for-global-oil-prices-and-inflation/