Iran threats against Red Sea are a big vulnerability for oil market
President Donald Trump risks closing Iran’s Bab al-Mandeb Strait if conflict in the Middle East escalates; This is a scenario that would cut off oil supplies to an already deeply disrupted market.
Bab el-Mandeb is one of the world’s most important trade chokepoints, connecting the Red Sea to the Gulf of Aden and the Arabian Sea. It served as a crucial relief valve for the oil market as exports through the Strait of Hormuz dropped due to Iranian attacks on tankers and cargo ships.
Saudi Arabia increased the flow of oil through the East-West Pipeline following the closure of Hormuz, with millions of barrels per day being diverted to the Red Sea. These barrels pass from Bab al-Mandab to Asia, helping to offset some of the loss of supply in key economies such as Japan and South Korea.
According to data provided by Kpler, oil and product exports through Bab al-Mandeb nearly doubled to 7.2 million barrels per day in April, compared to 3.9 million barrels per day in February, before the US and Israel attacked Iran.
Iran’s Revolutionary Guard threatens to shut down Iran on Monday Bab al-Mandeb If Israel does not stop its attacks in Gaza and Lebanon, Iranian state news agency Tasnim. Tehran has insisted that any peace deal with the United States must include Israel’s withdrawal from Lebanon.
Kpler commodity research director Matt Smith said Iran’s closure of Bab al-Mandeb would cut off Saudi barrels to Asia.
“This would be a step up in terms of growth and market impact,” Smith said. He said the flow of oil from the Red Sea was one of the factors preventing crude oil prices from rising.
US crude oil prices rose 8% at session highs on Monday following Iran’s threat to Bab al-Mandeb. Prices retreated after Israel and Lebanon agreed to a ceasefire on Wednesday, but it is not certain that the ceasefire will actually come into force.
Iran’s Lebanese ally Hezbollah, which operates independently of the government in Beirut, rejected the ceasefire agreement on Thursday. “We must disarm Hezbollah and demilitarize Lebanon,” Israeli Prime Minister Benjamin Netanyahu told CNBC on Wednesday.
The ceasefire between the US and Iran remains fragile. Washington and Tehran exchanged fire in and around the Strait of Hormuz earlier this week. Smith said that if the United States escalates military intervention, Iran’s natural response would be to target Bab al-Mandeb.
Iran’s Houthi allies in Yemen have largely stayed out of the war so far. The Houthis attacked commercial ships in the Red Sea from 2023 to 2025 in retaliation for Israel’s war in Gaza. Traffic at Bab al-Mandeb dropped and never fully recovered.
The Trump administration waged a 52-day air war against the Houthis that ended with a ceasefire in May 2025. In exchange for the militants ending their attacks on US-flagged ships in the Red Sea, the US halted its attacks.
Jack Kennedy, head of Middle East country risk at S&P Global Market Intelligence, said the Houthis could wait to enter the current conflict until Iran’s leadership decides it is advantageous to open another front.
Smith said the Houthis won’t need to do much to disrupt traffic in Bab al-Mandeb.
“They wouldn’t have to fire at every tanker that passed by,” the Kpler analyst said. “Some specific targets would be enough to start deterring passage through there.”
