According to Reuters on July 15th, Iran has issued a warning that if the United States continues to launch attacks, its blockade of global energy channels may expand from the Strait of Hormuz to the Red Sea route. Iran's Yemeni ally, the Houthi militants, has publicly stated that if the situation continues to escalate, the Strait of Mandeb will be closed.
Hormuz is not yet open, will the Red Sea be blocked again?
Once the Mandeb Strait is closed, both energy arteries may be cut off simultaneously
The Mandeb Strait is a narrow waterway connecting the Red Sea and the Gulf of Aden, through which approximately 7% of global oil trade and a large amount of container cargo pass. If the Mandeb Strait is blocked, it will form a "double blockade" with Hormuz - the world's two most important energy arteries will face risks at the same time.
Iran has made it clear that the Strait of Mandeb is the "top priority option on the table". The senior leaders of the Houthi armed forces have stated that if Saudi Arabia continues to attack Yemen, they will block the Mandeb Strait, and oil prices may soar to $200 per barrel.
Saudi Arabia has already put its' eggs' in the Red Sea basket, and the consequences of closing the Strait of Mandeb would be unimaginable
After the blockade of Hormuz, Saudi Arabia will transfer over 70% of its normal crude oil exports to the Yanbu Port in the Red Sea. According to Kpler and Signal Ocean data, the daily average shipment volume of Yanbu Port has been about 4 million barrels recently, compared to only about 973000 barrels in the same period last year. Reuters reported last week that Saudi Arabia is considering expanding its crude oil pipeline to the Red Sea coast.
This means that Saudi Arabia has put its "eggs" in the Red Sea basket. If the Strait of Mandeb is blocked, Saudi crude oil will lose both the export routes of Hormuz and the Red Sea.
The Houthi armed forces have a "criminal record", and the 2023 Red Sea attack caused global shipping chaos
This is not the first time that Houthi militants have threatened Red Sea shipping. After the outbreak of the Gaza War in October 2023, the organization launched multiple attacks on Red Sea merchant ships, claiming to support the Palestinians. The attacks led to major shipping companies such as Maersk and Hapag Lloyd suspending their Red Sea routes and forcing them to detour around the Cape of Good Hope in Africa, with longer voyages and higher costs.
After the ceasefire in Gaza last October, the attacks completely ceased. Last month, the Houthis announced that they would ban ships associated with Israel from passing through the Red Sea, but the threat has not yet been put into action. Maersk and Hapag Lloyd just resumed some Red Sea routes last week.
But this time the situation is different. At that time, Gulf oil could be freely exported and goods could be diverted. Now that Hormuz has been closed, a large amount of goods rely on the Red Sea passage. If the Mandeb Strait is blocked again, the situation will be much more severe than in 2023.
Whats does it mean for freight forwarders?
The uncertainty of Middle Eastern routes is accumulating, not disappearing. Hormuz has just shown signs of recovery, and the threat of the Red Sea has returned. The expected resumption of capacity on Middle Eastern routes needs to be reassessed.
The resumption of the Red Sea voyage may be interrupted again. Maersk and Hapag Lloyd's recently restored Red Sea route may once again face the risk of suspension. If the situation in the Strait of Mandeb deteriorates, shipping companies may once again choose to detour around the Cape of Good Hope - the freight rates on the Asia Europe route will regain support.
The risk of freight rate fluctuations is increasing. The threat of double blockade means that any change in the situation of any waterway may trigger drastic fluctuations in freight rates. It is recommended that freight forwarders involved in the Middle East, Red Sea, and Asia Europe routes reserve sufficient flexibility in their quotations and shorten the validity period of their quotations in the near future.
Closely monitor the direction of the conflict between Saudi Arabia and the Houthi armed forces. At present, the four-year ceasefire between the two sides has been broken, and the southern border of Saudi Arabia faces the risk of renewed fighting. If the conflict continues to escalate, the risk of closure of the Mandeb Strait will further increase.
