Standard Chartered says Middle East oil risk has expanded from one strategic chokepoint to two, with the Bab el-Mandeb Strait now sitting alongside the Strait of Hormuz. Houthi missile and drone attacks on two Saudi tankers pushed Brent briefly above $100 this week, and the bank warns Friday’s pullback on U.S.-Iran talks may prove temporary.
Brent crude for September delivery fell 4.4% to $96.36 per barrel at 1.35 pm ET on Friday. WTI for the same month was down 3.6% at $88.86/bbl. Prices gave up earlier gains on reports that Pakistan is trying to broker a return to U.S.-Iran nuclear negotiations — an effort China strongly backs as the conflict and the closure of the Strait of Hormuz threaten its energy security. But Standard Chartered says the pullback may prove temporary, because Middle East oil market risk has expanded from one strategic chokepoint to two.
Houthis carry the blockade into Bab el-Mandeb
On Monday, Yemen’s Houthi militant group imposed a targeted maritime blockade against Saudi Arabia, threatening to enforce it by blocking Saudi-linked vessels from transiting the Bab el-Mandeb Strait. The group called the blockade retaliation for a decade-long Saudi containment of Yemen and for a recent Saudi-backed airstrike targeting Sanaa International Airport.
Multiple Saudi-linked very large crude carriers abandoned planned transits and rerouted around Africa’s Cape of Good Hope, adding up to two weeks to each voyage. Two days later the Houthis followed through, launching ballistic missiles and drones at two Saudi oil tankers on Thursday, damaging both vessels and igniting fires onboard. Brent crude surged nearly $20 per barrel, briefly climbing above $100.
Saudi exports had already moved to the Red Sea port of Yanbu
The attacks landed after Saudi Arabia had already shifted roughly 70%-75% of its crude exports through the East-West pipeline to the Red Sea port of Yanbu, as closures and disruptions limited shipments through the Strait of Hormuz. Standard Chartered estimates loadings at Yanbu had climbed to approximately 4.5 million barrels per day as Riyadh redirected barrels away from the Arabian Gulf.
Combined with southbound crude flows from the Suez Canal, roughly 7 million barrels per day were transiting Bab el-Mandeb before the Houthi attacks. That makes the waterway one of the world’s most important oil chokepoints. Disruptions along the corridor ripple through the tanker market: war-risk insurance premiums rise, freight rates increase, tanker availability tightens and deliveries slip.
Europe’s diesel market carries the risk
European refiners are likely to be the most affected if Bab el-Mandeb is compromised, according to Standard Chartered. The region’s diesel markets are already contending with disruptions caused by Ukraine’s sustained attacks on Russian refineries and tanker infrastructure.
Diversion around southern Africa would extend voyages by 10-15 days depending on origin and destination, lengthening inventory replacement cycles. That could push refiners to source incremental Atlantic Basin barrels from West Africa, the U.S. or Brazil, reshuffling global trade flows and potentially widening regional dislocations in oil prices.
Clean product tankers would likely be the hardest hit, given their heavy reliance on Suez transit compared with crude VLCCs, which mainly serve long-haul Asia-bound trade and already travel around the Cape of Good Hope in normal market conditions.
Source: Oilprice.com
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