Red Sea Joins Hormuz as Threatened Oil Chokepoint, Raising Recession Risk

Rising Red Sea Tensions Put Oil Market on Alert

Disruptions to oil exports caused by Iran’s closure of the Strait of Hormuz are now being compounded by mounting threats to the Red Sea route, which has served as an alternative shipping corridor. If both the Strait of Hormuz and the Bab el-Mandeb Strait are shut at the same time, the shock to global oil supply chains could spill into a broader economic downturn.

The Wall Street Journal reported on July 17 that Saudi Arabia increased oil exports via the Red Sea after the Strait of Hormuz was closed. But the safety of that detour is no longer assured as a truce with Yemen’s Houthi rebels shows signs of unraveling.

Saudi Arabia is transporting crude produced in its eastern oil fields through the East-West Pipeline to the Red Sea port of Yanbu, where it is loaded onto tankers for export. Using that route, the kingdom has maintained crude exports of about 4.6 million barrels a day. That remains below the prewar level of 7.3 million barrels a day, but the Red Sea bypass has helped narrow the decline.

The risk is that fighting between Saudi Arabia and the Houthis, who control territory near the Bab el-Mandeb Strait, is flaring up again. The two sides have maintained a truce since 2022, but tensions have risen recently as they exchanged airstrikes. On July 13, Saudi Arabia and Yemen’s government forces bombed Sanaa International Airport, which is controlled by the Houthis. The Houthis responded by attacking Abha International Airport in southern Saudi Arabia with ballistic missiles and suicide drones.

If the conflict intensifies, the Houthis could resume attacks on ships transiting the Red Sea or target Saudi ports and oil facilities. Combined with Iran’s closure of the Strait of Hormuz, that would disrupt the Middle East’s two main oil shipping arteries at the same time. Kaja Kallas, the European Union’s high representative for foreign affairs and security policy, called the Houthi missile attack a warning that instability on land could quickly spread to the sea.

Markets see a prolonged breakdown in traffic through the two straits, or major damage to Saudi pipelines and port facilities, as the worst-case scenario. For now, countries are easing supply shortages by releasing strategic and commercial stockpiles. If the crisis drags on, that buffer could run up against its limits.

Capital Economics, a UK-based research firm, said prolonged disruption to shipping through the Strait of Hormuz and the Bab el-Mandeb Strait could push the global economy into recession.

Oh Se-seong, Hankyung.com reporter sesung@hankyung.com