Yemen has issued a threat to close the Bab al-Mandeb Strait if Saudi Arabia continues its strikes on Yemen’s infrastructure, warning that such actions could push oil prices to $200 a barrel. This development is part of the ongoing conflict involving Yemen’s Iran-backed Houthi rebels, Saudi Arabia, and the United States, which has escalated due to the broader U.S.-Israel–Iran war. The Bab al-Mandeb Strait is a critical maritime chokepoint, managing approximately 20% of global oil shipments. Saudi Arabia has already reacted by suspending oil exports through the strait and increasing military presence with U.S. support.
The potential closure threat has increased the market’s perception of risk, with the possibility of significant disruption to global oil supply looming. This has led to a noticeable shift in market pricing, as participants evaluate the likelihood of the strait’s closure by the end of September. The current pricing for the closure indicates an 18.5% likelihood, up from 8% a week ago, suggesting increasing concern over this scenario.
Key Takeaways
Pricing suggests market participants view the threat to close the Bab al-Mandeb Strait as increasingly credible, with odds rising from 8% to 18.5% over the past week.
