A potential Houthi naval blockade against Saudi Arabia could significantly escalate Middle East supply risks, putting one of the few remaining alternative oil export routes in jeopardy, Rystad Energy strategists said in a note on Monday.
The warning follows the Houthis' announcement of plans to impose a naval blockade against Saudi Arabia, raising concerns over the security of the Bab el-Mandeb Strait, a critical shipping corridor linking the Red Sea with global markets.
"While the Houthis have not yet clarified how the blockade would be enforced, their previous campaign against commercial vessels demonstrates both the capability and willingness to disrupt Red Sea shipping," said Rystad Energy analyst Jorge Leon.
The risk is heightened by Saudi Arabia's increased reliance on its Red Sea export infrastructure. The country has boosted shipments from its Yanbu terminals to about 4 million barrels per day as it seeks to bypass the Strait of Hormuz, where traffic remains close to a standstill.
Rystad's vessel-tracking data shows roughly 2.5 million bpd of those volumes are currently moving south through Bab el-Mandeb, leaving the route exposed to potential disruption.
Oil prices have fallen below $88 per barrel from around $91/bbl as traders focus on Qatar's proposed 10-day ceasefire initiative and signs of easing restrictions on Hormuz shipping. However, Rystad analysts said the decline reflects hopes for a ceasefire rather than a meaningful improvement in the physical supply outlook.
"The market is pricing in diplomatic optimism, but the underlying physical risks remain elevated," according to Rystad.
With Gulf exports heavily constrained by reduced Hormuz traffic, the market has become increasingly dependent on Saudi Arabia's East-West pipeline and Red Sea terminals to maintain crude flows.
"Any disruption at Bab el-Mandeb would therefore threaten not only Saudi shipments but one of the few remaining routes capable of compensating for the severe reduction in Hormuz traffic," Leon said.
Rystad warned that if a ceasefire fails to materialize, Hormuz remains largely closed, and Houthi pressure on Red Sea shipping intensifies, oil prices could rebound sharply as markets reassess the risk of further supply losses.