Iran-backed Houthi militants have seized the Yemeni port of Mocha, pushing towards the Bab el-Mandeb Strait, further escalating global energy supply risks. The price of Brent crude oil soared to nearly $110 per barrel, while the average price of diesel in the United States surpassed $6 per gallon for the first time in history. This development, along with pressure on global debt and Asian stock markets, has raised concerns worldwide.
According to Reuters, Yemeni government military sources reported that after capturing Mocha on Thursday (September 10th), the Houthi militants continued their southward advance along the Red Sea coast, reaching the Hanish Islands and increasing their influence over the Bab el-Mandeb Strait.
The Bab el-Mandeb Strait, located at the southern end of the Red Sea, is one of the world’s most important shipping lanes. With the ongoing tensions between the US and Iran restricting traffic through the Hormuz Strait, Saudi Arabia, the world’s largest oil exporter, heavily relies on the Red Sea route for oil exports. Any disruption in the Bab el-Mandeb Strait could pose a significant risk to global energy supplies by obstructing another major channel.
Yemeni government forces and their allies are currently redeploying southwards along the Red Sea coast towards Dhubab. Controlling strategic locations such as Dhubab and Perim Island, facing each other across the sea, is crucial for dominating the Bab el-Mandeb Strait.
United Nations Special Envoy for Yemen Hans Grundberg expressed the urgency for international action to address the war in Yemen, which has entered “a new, more dangerous phase.” He emphasized that the Houthi control of Mocha creates a serious threat to freedom of navigation near one of the world’s most crucial straits.
US representative Jenifer Neidhart de Ortiz, at the same meeting, condemned the Houthi militants as “agents and tools of Iran,” declaring the escalation unacceptable and holding those responsible for the consequences.
Yemeni government officials, Iranian sources, and regional informants informed Reuters that the Houthi advance along the coast this week is being directly guided by Iran’s Islamic Revolutionary Guard Corps. Houthi spokesperson Mohammed Abdulsalam claimed their actions are defensive and will cease once attacks on Yemen stop.
The risks in the Red Sea region are swiftly reflected in energy markets as Brent crude oil surged to $109.97 per barrel, hitting a four-month high. By Thursday evening at 8:45 pm ET, Brent crude was trading at $108.68, while West Texas Intermediate (WTI) stood at $103.45, both showing over 6% gains.
The two major oil benchmarks saw a cumulative price increase of nearly 13% this week, marking the largest weekly gain since mid-July and possibly ending a week of trading above $100 per barrel for the first time since mid-May.
Analysts point out that the risks no longer revolve solely around Iran and the Hormuz Strait. The Houthi attacks on Saudi energy facilities from within Yemen and the new threats to Red Sea navigation raise concerns about prolonged and broader supply disruptions.
IG analyst Tony Sycamore stated, “As the situation deteriorates and Iran demonstrates its willingness to escalate and prolong the conflict, the possibility of WTI crude oil retesting the high of $119.48 per barrel from early March is becoming increasingly likely.”
GasBuddy data shows that the average price of diesel in the United States surpassed $6 per gallon for the first time on Thursday. The ongoing US-Iran conflict and attacks on Russian refineries in Ukraine continue to tighten supplies.
The sharp rise in oil prices has heightened global inflation concerns, with market expectations growing for major central banks to further tighten monetary policies.
RBC Capital Markets analysts noted a significant escalation in the recent clashes between the Houthi forces and Saudi-backed troops, signaling the most severe violence in Yemen in years. As the Houthis advance, maritime traffic through the Bab el-Mandeb Strait faces serious threats. The institution forecasted Brent crude oil prices reaching $121.99 per barrel in the fourth quarter.
The yield on the US 10-year Treasury bond neared 5%, while the 30-year yield rose to its highest level since 2007 and the 2-year yield jumped 12 basis points. The market currently estimates a 68% probability of a Federal Reserve interest rate hike this month.
Asian markets on Friday generally declined, with the Nikkei in Japan falling by 2.8%, the KOSPI index in South Korea dropping by 2.7%, and the Australian stock market decreasing by 1%.
JPMorgan analysts predict that from now until the end of the year, eight out of nine developed market central banks may raise interest rates, including the Federal Reserve, Bank of Japan, and major central banks such as Australia.
On the other hand, OPEC’s latest monthly report has lowered its global oil demand growth forecast for 2026 for the fifth consecutive time, now projecting an increase of only 380,000 barrels per day. However, Reuters surveys indicate that in August, OPEC’s oil production decreased by 640,000 barrels per day. This suggests that despite the downward revisions in demand forecasts, the risks in Middle Eastern shipping and supplies may still support international oil prices at high levels.