Houthi Red Sea blockade sends WTI crude above $95 a barrel

Yemen's Houthi forces struck the first Saudi oil tankers in the Red Sea, sending WTI crude futures up 1.3% and Brent above $95 as a new maritime blockade threatens to cut off a critical oil transit route.

Yemen's Houthi rebels struck the first Saudi oil tankers in the Red Sea on Wednesday, sending WTI crude futures up 1.3% and Brent above $95 a barrel as a threatened naval blockade risks severing the kingdom's primary export route.

"The Houthis have opened a second front against Saudi Arabia's oil exports, and the market is pricing in a meaningful supply disruption," said Rosemary Kelanic, senior fellow at Defense Priorities. "Any attacks on vessels in the Red Sea will suppress all international traffic, not just Saudi-bound ships."

At least seven oil tankers made sharp U-turns near Yemen after the Houthis announced a "maritime embargo" against Saudi Arabia on Monday, according to ship-tracking data from MarineTraffic and Kpler. The Liberian-flagged crude tanker Rodos, loaded with Saudi crude bound for India, reversed course nine hours after departing the Red Sea port of al-Muajiz. Saudi Arabia now ships more than 70% of its crude exports through the Bab al-Mandab Strait after the Strait of Hormuz was effectively closed in late February, with about 4 million barrels per day moving from the Red Sea port of Yanbu — up from roughly 973,000 a year earlier.

The loss of Red Sea access would remove roughly 4% of the world's oil supply from global markets, according to Kpler data. With the Strait of Hormuz already blocked, Saudi Arabia has no alternative short of rerouting crude around the southern tip of Africa — a journey that would add weeks to transit times and push freight rates sharply higher. The EU's naval force Aspides recommended Wednesday that vessels linked to Israeli, US or Saudi interests avoid the Red Sea and Gulf of Aden until the threat level decreases.

A Second Chokepoint Under Threat

The Bab al-Mandab Strait, a 32-kilometer-wide passage connecting the Red Sea to the Gulf of Aden, handles about 15% of global sea trade. The Houthis, who control much of northern Yemen and territory near the strait, have demonstrated the ability to threaten vessels with missiles, drones, and explosive boats. The group said its blockade was retaliation for what it described as Saudi restrictions on Yemen and a recent strike on Sanaa International Airport.

The last time the Houthis targeted Red Sea shipping during the Gaza war in late 2023, four ships were sunk, one vessel seized, and nine crew members killed. Insurance premiums for vessels transiting the region surged, and several major shipping lines rerouted around the Cape of Good Hope for months. The current disruption compounds an already strained global energy system: the Strait of Hormuz, through which about a fifth of the world's oil passed before the war, has been fully or partially closed since late February after US and Israeli attacks on Iran.

Diplomatic and Market Fallout

US Secretary of State Marco Rubio blamed Iran for the Houthi escalation, saying Washington has contacted Saudi Arabia multiple times over the past week about the threats. Pakistan, a key Saudi ally with a mutual defense pact signed last year, warned that "any hostile act against Pakistani-flagged vessels will be regarded as a grave threat to Pakistan's national security."

The price of WTI crude jumped more than 3% on Wednesday, while the yield on the 10-year US Treasury note rose 0.17% to 4.64% as traders priced in higher inflation risks from surging energy costs. US rate futures now imply a 24.1% probability of a 25-basis-point rate hike at next week's Federal Reserve meeting, up from near zero before the blockade announcement. The S&P 500 fell 0.52% in pre-market trading as chip and AI infrastructure stocks lost momentum ahead of Alphabet's earnings, with energy stocks the only sector trading higher.

Naveen Das, senior oil analyst at Kpler, said the impact on consumers would not be immediate but warned that "we could weather it for two weeks, three weeks, even a month, but even in that time, we will see higher freight rates, higher energy prices, and that bleeds into higher energy consumer costs."

This article is for informational purposes only and does not constitute investment advice.