Oil Crisis Explodes as Iran, Houthis Threaten 2 Key Routes

The Middle East oil crisis is entering a far more dangerous phase. After months of disruption in the Strait of Hormuz, Iran now has another pressure point on global energy supplies through its Houthi allies in Yemen. The Iran-aligned rebels have seized strategic territory along the Red Sea coast, including Perim — also known as Mayun — Island at the mouth of the Bab el-Mandeb Strait, one of the world’s most important shipping chokepoints. At the same time, Saudi Arabia has been forced to shut down its vital East-West oil pipeline after drone attacks damaged infrastructure inside the kingdom.

The result is a nightmare scenario for global oil markets: the two main escape routes for Gulf crude are under pressure at the same time.

Before the Iran war, the Strait of Hormuz carried roughly a fifth of global oil and energy supplies. As traffic through the narrow waterway collapsed, Saudi Arabia increasingly relied on its giant East-West pipeline to move crude across the kingdom to the Red Sea — bypassing Hormuz entirely. But that safety valve has now been temporarily shut, while Houthi forces are simultaneously tightening their grip around the Bab el-Mandeb route that tankers must use to leave the Red Sea toward Europe.

Brent crude has already surged back above $100 a barrel. It settled Friday at $104.61, after gaining more than 8% for the week. The question now dominating markets is much more alarming: How high could oil go if both Middle Eastern chokepoints remain impaired?

Two chokepoints, one global oil emergency

The Strait of Hormuz is the gateway out of the Persian Gulf. Oil from Saudi Arabia, Iraq, Kuwait, the United Arab Emirates and other producers traditionally passes through the narrow passage between Iran and Oman before entering the Arabian Sea.

Shipping there is already a fraction of normal levels. Reuters reported that only seven vessels transited Hormuz on one recent day, compared with far higher pre-war traffic. Iran has sought to assert control over passage through the strait, while tanker attacks, mines and military action have made commercial shipping increasingly dangerous and expensive.

That made Saudi Arabia’s alternative route enormously important. The kingdom’s East-West Pipeline, known as Petroline, stretches roughly 1,200 kilometers across Saudi Arabia from the oil-producing east to the Red Sea port of Yanbu in the west. Its maximum capacity is around 7 million barrels per day. In recent weeks it had been moving roughly 4 million barrels per day — about 4% of total global oil supply — away from the Persian Gulf and toward the Red Sea.

The system effectively allows Saudi crude to avoid Hormuz. Oil is pumped from eastern production centers across the desert to Yanbu, loaded onto tankers and shipped south through the Red Sea. But that route has now been hit from two directions.

Saudi Arabia loses its Hormuz bypass

Saudi Arabia shut the East-West Pipeline after drone attacks struck infrastructure in the kingdom. Saudi and Iraqi authorities said the drones originated from Iraqi territory, where powerful Iran-backed militias operate. No group has publicly claimed responsibility for the pipeline strike, making it important to distinguish the attack from separate Houthi operations launched from Yemen.

President Donald Trump said Iran was “probably” responsible for the attack, although Tehran has denied directing proxy attacks across the region.

The shutdown could become critical very quickly. Reuters estimates that Yanbu has enough crude stored to keep exports flowing for only about five to seven days. Industry estimates for repairs vary widely, with some suggesting the pipeline could remain impaired for several weeks. If the roughly 4 million barrels per day recently traveling through the pipeline cannot be replaced, the world could lose another 4% of supply from an already tight market.

Saudi production itself has already fallen dramatically during the conflict, according to Reuters, from about 10.9 million barrels per day in February to around 6.2 million in August. That is why the pipeline is so crucial: It was not simply another Saudi oil route. It had become one of the world’s most important emergency bypasses.

Houthis move toward the second oil gateway

The situation is even more dangerous because the Red Sea exit is now under renewed threat. Iran-aligned Houthi forces have captured the port of Mocha and advanced across Yemen’s western coastline. They also seized Perim Island, sitting directly inside the Bab el-Mandeb Strait between Yemen and Djibouti. The narrow passage connects the Red Sea with the Gulf of Aden and ultimately the Indian Ocean.

The Houthis do not yet have undisputed control of all traffic through Bab el-Mandeb. But their position gives them a powerful ability to threaten commercial vessels with missiles, drones, mines and coastal weapons.

That matters enormously for Saudi oil. Crude pumped through the East-West Pipeline reaches Yanbu on the Red Sea. Tankers heading toward Asian markets or around Africa must then navigate waters vulnerable to Houthi attack. European-bound crude can travel north through the Suez Canal, but instability around Bab el-Mandeb affects broader tanker routing, freight rates and confidence throughout the Red Sea system.

In effect, the conflict is squeezing Saudi Arabia from both sides: Iran threatens the eastern gateway at Hormuz, while Iranian-backed forces threaten the western outlet through the Red Sea.

Latest Houthi attacks hit Saudi energy targets

The Houthis have also resumed direct attacks against Saudi Arabia itself. Recent Houthi missile and drone strikes have targeted Saudi cities, military installations and energy infrastructure. Earlier this month, attacks on Saudi petroleum facilities pushed crude prices higher as markets feared a widening campaign against the kingdom’s oil network.

The developments mark a dramatic reversal after years in which the Yemen conflict had become relatively quieter. The Houthis’ latest territorial offensive has pushed Saudi-backed Yemeni forces back from key Red Sea positions and raised fears that the group could recreate around Bab el-Mandeb the type of maritime pressure Iran has exercised at Hormuz.

Saudi Crown Prince Mohammed bin Salman has reportedly sought additional U.S. assistance as the kingdom faces mounting attacks. So far, Trump has stopped short of promising a major new American military intervention against the Houthis, while Washington has provided intelligence support.

Another ship hit near Qeshm Island

The danger in Hormuz was underscored again Sunday when an Iranian commercial vessel was struck near Qeshm Island, close to the strategic shipping lane.

Iranian state media said one person was killed and several others injured after the vessel was hit by a projectile. Iranian outlets described the incident as a U.S. or enemy attack, but American authorities had not publicly confirmed responsibility as of Sunday morning. The British maritime security agency UKMTO separately reported that a vessel in the Strait of Hormuz had been struck by a projectile and caught fire.

The location is highly sensitive. Qeshm Island sits immediately beside the Strait of Hormuz near Iran’s southern coast, meaning any military confrontation there can rapidly affect commercial shipping.

The attack also came just before regional officials were expected to meet in Oman to discuss navigation through Hormuz. Iran has signaled that it will not fully reopen the waterway unless Washington meets Tehran’s conditions.

How high could oil prices go?

The answer increasingly depends on how long the physical supply disruptions last. The less alarming scenario is that Saudi Arabia repairs the East-West Pipeline quickly, some Hormuz traffic improves and Houthi attacks remain sporadic. Under those conditions, Brent could remain around the current $100 to $110 range. But Wall Street’s risk scenarios are moving sharply higher.

Goldman Sachs has warned that Brent could exceed $120 a barrel if Gulf production remains several million barrels per day below pre-war levels. Bank of America has outlined scenarios in which crude trades between $95 and $120 if disruptions continue — and has warned of a worst-case move toward $150 if Middle Eastern energy infrastructure suffers prolonged damage. Barclays has separately said spot Brent could test roughly $150 if severe Hormuz disruptions persist for several months.

The simultaneous threat to Hormuz, the Saudi pipeline and Bab el-Mandeb makes those extreme scenarios less theoretical than they were only weeks ago.

The world has already lost millions of barrels per day from disrupted Gulf exports. The International Energy Agency expects global oil supply to drop by millions of barrels per day this year. Emergency stocks are also being depleted.

Trump is running out of easy options

For President Trump, the oil shock is becoming both an economic and strategic problem. The most immediate option is another release from the U.S. Strategic Petroleum Reserve. But there is a major problem: the reserve has already fallen to about 285 million barrels, its lowest level since 1982, after repeated releases aimed at cushioning the impact of the Iran war.

That means Washington can still release oil, but its emergency cushion is becoming thinner.

A second option is to push allied producers and alternative suppliers to maximize output. Washington has already explored greater access to Venezuelan crude and mechanisms to replenish the SPR through oil swaps. Russia is another potential source of additional supply, although easing sanctions on Moscow would carry major geopolitical consequences and has previously been considered by the administration as one possible way of cooling energy prices.

Trump can also pressure U.S. oil companies to increase domestic production. But new drilling cannot replace several million barrels of lost Middle Eastern crude overnight. Even more problematic is refining capacity: American refineries are already running near maximum utilization.

The White House is now considering using the Defense Production Act to help expand or improve U.S. refining capacity. Officials have discussed ways to increase throughput at existing plants and accelerate investment, although such moves would provide little immediate relief during a sudden global crude shortage.

Another option is military. The United States could intensify strikes against Houthi missile sites, coastal positions and command centers or help Saudi forces retake territory around Bab el-Mandeb. It could also increase naval escorts through Hormuz and the Red Sea.

But that carries the greatest risk of all: deeper American involvement could provoke Iran and its proxies into even broader attacks on tankers, pipelines, refineries and U.S. bases.

The nightmare scenario: Hormuz and Bab el-Mandeb at once

For decades, energy planners worried about a closure of the Strait of Hormuz. The current crisis is potentially worse because the alternative routes themselves are now being attacked.

Saudi Arabia built the East-West Pipeline precisely so oil could bypass Hormuz. But if the pipeline remains damaged — and if tankers leaving Yanbu face a hostile Houthi force around Bab el-Mandeb — the bypass loses much of its strategic value.

That is the danger confronting the global economy now: not one blocked oil artery, but several chokepoints failing at once.

Brent above $100 is already painful. Diesel prices in the United States have climbed above $6 a gallon, inflation pressures are increasing and U.S. bond yields have surged.

A prolonged loss of another 4 million barrels per day from Saudi Arabia could push the oil market into an entirely different crisis.

And if Hormuz, Saudi Arabia’s East-West Pipeline and the Bab el-Mandeb corridor all remain compromised simultaneously, the question may no longer be whether oil reaches $120 a barrel. It could become whether the world can prevent a run toward $150.