Iran warns of $200 oil as Houthis threaten to close Bab el-Mandeb

Iran's Islamic Revolutionary Guard Corps threatened to close "all other export corridors that benefit the US and its allies" as the Houthi militia prepared to shut the Bab el-Mandeb strait, a move that could push crude above $200 a barrel and compound the worst supply crisis since the Gulf War.

"If the current situation aggravates, the Bab el-Mandeb Strait and the Strait of Hormuz will be closed in an operational alliance," Mohammed al-Farah, a member of the political bureau of Ansarullah, the Houthi resistance movement, told Iran's Press TV. "Oil prices would then skyrocket to $200 a barrel in a dreadful shock."

The Houthis fired missiles at Saudi Arabia on Monday after accusing the kingdom of bombing an airport under their control, shattering a truce that had largely held since March 2022. The Bab el-Mandeb gateway links the Red Sea to the Gulf of Aden, handling 10% to 12% of global annual maritime trade and serving as the primary export route for Saudi crude. The Strait of Hormuz, which Iran effectively closed in late February, carried about a fifth of daily global oil and gas shipments before the conflict erupted.

A simultaneous closure of both chokepoints would force tankers and container ships to reroute around the Cape of Good Hope, adding weeks to transit times and raising shipping costs well above the pandemic-era peaks. Brent crude already closed at its highest since June 12 on Tuesday, and West Texas Intermediate at its highest since June 15, as the latest US strikes deepened supply disruptions in the Gulf.

Iran's directive to the Houthis, confirmed by sources to Reuters, represents a deliberate escalation designed to maximize economic pressure on Washington as President Donald Trump threatens to hit Iranian power plants and bridges next week unless Tehran resumes negotiations. "I'll save the energy targets for last, but ultimately we'll hit energy targets," Trump said in a Fox News interview Tuesday.

The Houthis have already demonstrated their ability to choke commerce through Bab el-Mandeb. After the Gaza war erupted in October 2023, the Iran-backed group launched attacks on commercial shipping in the Red Sea, forcing major carriers to reroute around southern Africa and prompting US and British airstrikes. That campaign, which lasted months, raised global transport costs and disrupted supply chains from Europe to Asia.

Houthi Capabilities Extend Beyond Yemen

The militia has been preparing for a prolonged fight by designating multiple successors for every senior post, including a family member to replace leader Abdul-Malik al-Houthi if he is killed, according to sources in Yemen. It is also transferring drone technology to al-Shabab, the Somali militant group, to control both sides of the waterway — extending Iran's reach to the Horn of Africa independently of Tehran's direct command.

"The Houthis are becoming the leaders of the region," a source told The Telegraph, describing a deliberate Iranian attempt to control "the other side of the Red Sea" and replicate its grip on the Strait of Hormuz.

Andreas Krieg, a senior lecturer at King's College London's School of Security Studies, described the Houthi threat as "another nuclear option" for Iran after Hormuz — one it would deploy only if the Islamic Revolutionary Guard Corps concluded that a return to all-out war had become unavoidable. Fawaz Gerges, a Middle East scholar, said Tehran was showing Washington it could threaten both chokepoints simultaneously, transforming the conflict from a bilateral confrontation into a challenge to the sea lanes underpinning global energy trade. "Iran is willing to go all the way," he told Reuters.

Oil Markets Price in Prolonged Disruption

Brent crude rose further in early Wednesday trading after closing up 2% to a one-month high on Tuesday. The US military said it hit dozens of targets near the Strait of Hormuz and Iranian coastal areas in a seven-hour wave of strikes late Tuesday, the third consecutive night of American attacks. Iran responded by firing missiles at US bases in Kuwait, Jordan and Bahrain, while Jordan's air defense intercepted three ballistic missiles that entered its airspace from Iranian territory.

The last time both the Strait of Hormuz and Bab el-Mandeb faced simultaneous disruption was during the 1990-91 Gulf War, when Iraq's invasion of Kuwait removed 4.3 million barrels a day of supply and sent Brent above $40 — equivalent to roughly $90 in today's dollars. A $200 oil scenario would represent a shock more than double that magnitude, with implications for global inflation, central bank policy, and consumer demand that extend far beyond the energy sector.

Abdulaziz Sager, chairman of the Saudi-based Gulf Research Center, said Gulf states increasingly believe diplomacy with Iran has reached its limits. "Both a victorious Iran and a defeated Iran carry consequences for the region," he said, adding that many Gulf states may consider the costs of the latter "more acceptable if they lead to a more stable regional security environment."

This article is for informational purposes only and does not constitute investment advice.