Houthis declare maritime blockade of Saudi Arabia, raising fears for Asian oil importers

Yemen's Iran-aligned Houthi rebels declared a maritime blockade of Saudi Arabia on Monday, rattling international energy markets. With the Strait of Hormuz already effectively closed, fears are growing that a blockade of the Bab el-Mandeb Strait — the entrance to the Red Sea — would deliver a severe shock to the global supply chain for crude oil and petroleum products.

Asian countries that rely heavily on Middle Eastern crude, particularly South Korea, Japan and China, are expected to bear the brunt of any disruption.

According to shipping data firm Kpler, cited by Reuters, an average of 7.4 million barrels of oil and petroleum products passed through the Bab el-Mandeb Strait daily in June, equivalent to about 7% of global crude output.

Just last year, daily throughput at the strait stood at around 4.2 million barrels. After the Strait of Hormuz — through which roughly 20% of global energy flows — was effectively shut following the US-Iran war, Saudi Arabia sharply increased crude exports through the Red Sea port of Yanbu by routing shipments through its east-west pipeline, dramatically elevating the Bab el-Mandeb's strategic importance.

Energy exports through Yanbu have surged to an average of 4 million barrels per day, more than four times the 973,000 barrels recorded a year earlier.

The Red Sea export route via Yanbu has been credited with serving as a lifeline for Middle Eastern energy supply during the US-Iran war, helping to contain a sharper spike in global oil prices. The main importers of crude and petroleum products shipped from Yanbu are Asian nations — South Korea, Japan, China, Singapore and India.

Noam Raydan, a senior fellow at the Washington Institute for Near East Policy, told The New York Times that Asian countries stood to suffer the most if the Houthis moved to enforce a maritime blockade against Saudi Arabia.

Raydan said that if the blockade materialized, shipping would have to be rerouted through the Suez Canal, adding that the move "would add greater burden to transportation costs."

The impact of a blockade could extend well beyond Asia, rippling across global energy markets.

After the Strait of Hormuz was closed, major Asian economies scrambled to secure alternative energy supplies, triggering a broad rise in global energy prices.

Beyond the energy supply disruption, the prospect of wider disruption to maritime shipping through the Red Sea has also grown.

Reuters, citing insurance industry sources, reported that war-risk premiums on cargo shipped through the Red Sea had already risen after the Houthis announced the blockade against Saudi Arabia.

War-risk premiums for vessels transiting the Red Sea jumped from about 0.3% on July 17 to roughly 0.75% following the Houthi announcement.

However, Reuters said it remained unclear how the Houthis intended to enforce a maritime blockade against Saudi Arabia, or whether the declaration would lead to a resumption of attacks on vessels sailing through the Red Sea.

The Houthis had previously attacked commercial ships in the Red Sea to press for an end to Israel's military campaign in Gaza.

Those attacks severely disrupted global maritime shipping, forcing major carriers to abandon the Red Sea route through the Suez Canal in favor of the far longer detour around Africa.

Even after the Houthis halted their attacks, global shipping lines continued to use the Cape of Good Hope route around the southern tip of Africa, and the number of vessels transiting the Red Sea and Suez Canal remains well below pre-Gaza war levels.

Since the outbreak of the US-Iran war, the Houthis have repeatedly warned they could blockade the Bab el-Mandeb depending on how the conflict unfolds.

In June, the Houthis declared they would block Israeli vessels from passing through the Red Sea — though Reuters said that declaration was never carried out.

Oil markets are watching developments closely, still pricing in the possibility of a diplomatic resolution between the United States and Iran.

September-delivery Brent crude futures settled at $89.22 per barrel on the ICE Futures Exchange on Monday, up 1.27% from the previous session. Prices pulled back from their intraday high after Iran said diplomatic contacts with the United States were ongoing behind the scenes.