The Houthis have escalated threats towards Saudi oil exports, posing significant risks to the global oil supply, yet markets have not fully adjusted to this development. The blockade of the Bab el-Mandeb Strait, announced by the Iran-backed Houthis, threatens to cut off a crucial oil route for Saudi Arabia following the earlier closure of the Strait of Hormuz by Iran. This move jeopardizes the flow of approximately 7% of the world’s oil supply, potentially exacerbating the existing disruptions in Gulf oil shipments. Despite these threats, current market prices suggest that the full impact of a potential simultaneous closure of these vital chokepoints has not been reflected, with oil prices retreating to around $70 per barrel from earlier spikes.
Key Takeaways
Market behavior suggests that the full impact of the Houthi threats on global oil supply has not been fully priced in.
Current pricing reflects skepticism about a complete closure of key oil routes, as seen in the relatively low odds of oil reaching $130 per barrel.
The escalation marks a significant rupture in the previously stable relations between the Houthis and Saudi Arabia, indicating potential for further market volatility.
