The Middle East conflict spreads! The Houthi forces "join the fight," and is the "second-largest energy corridor," the Strait of Mandeb, also at risk?

The Houthis officially enter the Iran war, and the global energy market faces a new shockwave.

According to Xinhua News Agency, the Houthi armed group announced through its controlled Masira TV on the 28th that it launched ballistic missiles at Israel early that morning, and the operation will continue until the aggression stops.

This move signifies the opening of a new front in the war, putting the southern end of the Red Sea, the Bab-el-Mandeb Strait, back at risk.

Saudi Arabia transports oil to Yanbu Port via east-west pipelines and then exports it through the Bab-el-Mandeb Strait; this is the core alternative for oil transport after disruptions in the Strait of Hormuz. Since March, the crude oil loading volume at Yanbu Port has surged to an average of about 3.4 million barrels per day, with some daily flows exceeding 5 million barrels this week, setting a historical record.

At the same time, Iran launched retaliatory strikes against Gulf Arab countries and Israel on Saturday. Industrial areas in Abu Dhabi, UAE, caught fire, Kuwait’s airport radar system was severely damaged by drones, and the port of Salalah in Oman was forced to shut down.

Expectations for a ceasefire in the energy market have cooled; Brent crude oil closed above $115 per barrel on Friday, marking a cumulative increase of about 60% since the outbreak of the conflict.

Houthis Enter the Fray, Bab-el-Mandeb Risk Surges

The Houthis’ entry into the war adds a highly sensitive energy geographical variable to this conflict. The Bab-el-Mandeb Strait is the chokepoint from the Red Sea to the Gulf of Aden, ranking alongside the Strait of Hormuz as one of the two most critical energy shipping routes globally.

Since the outbreak of the Israel-Hamas war in 2023, the Houthis’ missile and drone attacks have effectively blocked most Western shipping companies’ passage through this waterway, and there is a risk that this situation may further deteriorate.

It is noteworthy that Saudi Arabia is currently exporting oil from Yanbu Port, circumventing the nearly closed Strait of Hormuz, while this port is fully within the range of Houthi missiles.

Bloomberg previously reported that the U.S. has issued a warning regarding the threat of Houthi attacks near the Bab-el-Mandeb Strait, and this potential risk continues to rise as the situation escalates.

This means that the alternative export route that Saudi Arabia has adopted in response to the closure of the Strait of Hormuz is also facing direct threats. If Yanbu Port is struck, another crucial safeguard for global crude oil supply will be shaken, and the “buffer solution” that the market hopes for may fail.

Strait of Hormuz Unresolved, Negotiations Stalled

The Strait of Hormuz has been nearly closed since the U.S. and Israeli coalition launched strikes against Iran on February 28. Normally, about one-fifth of the world’s oil and liquefied natural gas is transported through this waterway.

Trump has pushed for negotiations this week, extending the deadline for Tehran to reopen the Strait of Hormuz to April 6, and proposed a plan consisting of 15 items, the core conditions including:

Iran dismantling its nuclear facilities and reducing its missile stockpiles in exchange for sanctions relief. The Iranian side has rejected this plan, insisting on war reparations, recognition of some form of control over the Strait of Hormuz, and guarantees that the U.S. and Israel will no longer strike Iran.

According to media reports citing informed sources, U.S. Secretary of State Marco Rubio stated in a call with G7 counterparts on Friday that this war will end in weeks, not months.

Trump’s envoy Steve Witkoff also mentioned that a meeting between the U.S. and Iran might take place “this week,” with Pakistan seen as the most likely negotiation location.

Foreign ministers from Saudi Arabia, Turkey, and Egypt are expected to visit Islamabad from March 29 to 30 to discuss efforts to cool regional tensions.

Rumors of Ground Invasion Heat Up, Market Sentiment Remains Pressured

While extending the deadline to April 6, Trump has also secured more time for the U.S. to gather troops in the region, leading to heightened speculation about ground deployments.

Media reports citing military analysts indicate that if Trump decides to deploy ground forces, he may choose to seize Kharg Island in the Persian Gulf, from which almost all of Iran’s oil exports are shipped.

The U.S. may also seek to control the Iranian side of the Strait of Hormuz to forcibly reopen this critical route for oil, gas, and container ships, or deploy special forces to relocate approximately 440 kilograms of highly enriched uranium from Iran.

Financial markets have reacted to the ongoing escalation: U.S. stocks fell to a seven-month low on Friday, and the 10-year U.S. Treasury yield rose to near its highest level since July. Fuel shortages continue to escalate globally, with the Philippines declaring an energy emergency, and concerns about stagflation risks are also rising in the economics community.

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