Yemen’s Houthi militants have taken control of two strategic islands in the Red Sea, raising concerns over global oil supply disruptions amid escalating regional tensions. The capture of Greater and Lesser Hanish islands enhances the Iran-backed group’s influence over a critical maritime route, following their recent advances along Yemen’s Red Sea coast, including the seizure of the port of Mokha and Perim island near the Bab al-Mandab strait.
Located approximately 160 kilometers north of the Bab al-Mandab—a vital chokepoint linking the Red Sea to the Arabian Sea—the islands’ occupation threatens to further complicate shipping routes that are essential for trade between Saudi Arabia and key Asian markets. The Houthi expansion has prompted Yemen’s Saudi-backed government to intensify efforts to reclaim lost territory, amid simultaneous security challenges faced by Saudi Arabia, which is confronting missile and drone attacks from Iran-aligned militant groups in Iraq.
Saudi Arabia has responded to the heightened threat level with frequent air alerts as violence continues. On Monday, ballistic missile and drone strikes by the Houthis resulted in injuries to 13 civilians. The ongoing conflict has displaced nearly 94,000 Yemeni civilians since hostilities escalated earlier this month, according to the International Organization for Migration. Humanitarian organizations report that about 200 schools in southwestern Yemen have been repurposed as emergency shelters, while over 2,000 people have reportedly fled to Djibouti across the Red Sea.
The proximity of Houthi forces to the Bab al-Mandab also places them within 32 kilometers of a U.S. military base in Djibouti, heightening international security concerns in the Horn of Africa.
The recent Houthi territorial gains come amid a significant disruption to Saudi Arabia’s east-west oil pipeline, which transports crude from the Persian Gulf through to the Red Sea export terminal of Yanbu. The pipeline has been shut down due to militant attacks, and officials estimate repairs could take several weeks. Analysts warn that prolonged outages could tighten global oil supplies further.
Tim Waterer, chief market analyst at KCM Trade, highlighted that the major uncertainty is the duration of the pipeline disruption, noting that extended closures could push oil prices significantly higher. Energy research firm Rystad Energy estimated that between 2.6 million and 4 million barrels of oil per day that flowed through the pipeline since late August are now at risk of disappearing from the market. Janiv Shah, Rystad’s vice-president of oil markets, said the recent rise in Brent crude prices reflected market reactions to the anticipated supply losses. Though Saudi Arabia’s reserves may temporarily offset the disruption, Shah cautioned that this buffer could quickly diminish.
On Tuesday morning, Brent crude prices rose by 1.17% to $106.92 per barrel. The average price of diesel in the United States reached $6 per gallon last week, driven by compounded supply constraints including Iran-related tension and Ukrainian attacks on Russian refineries.
The Houthi leadership has declared their intent is not to obstruct all commercial shipping through the Red Sea, but specifically to target vessels linked to Saudi Arabia. Given Saudi Arabia’s status as the world’s largest oil exporter, disruptions from the region could severely impact economies in Africa and Asia that depend heavily on Middle Eastern oil imports.
Industry experts warn that global oil stockpiles, which had provided some insulation from supply shocks earlier this year, have largely been depleted. Since the onset of hostilities in Ukraine in February, countries have steadily released reserves to stabilize markets, and the United States eased restrictions on floating stocks from sanctioned nations. Chevron CEO Mike Wirth observed that these buffers have been exhausted, and cautioned that the likelihood of near-term price declines is low, with risks skewed toward further increases in the coming months.