Yemen's Houthi rebels have seized the strategic islands of Greater and Lesser Hanish in the southern Red Sea, escalating fears of a new global oil supply crisis following a recent attack on a Saudi oil pipeline. The developments occurred as Brent crude rose to $106.92 a barrel and U.S. diesel prices surpassed $6 a gallon for the first time last week.
The conflict, compounded by Ukrainian strikes on Russian refineries, has tightened global oil supplies. Saudi Arabia has been rerouting its exports away from the Persian Gulf due to the Iran war, which has stifled shipping through the Strait of Hormuz. The Kingdom has relied on its 1,200-kilometer East-West Pipeline to transport crude from its Gulf ports to the Red Sea port of Yanbu for export.
However, Saudi authorities were forced to shut down the pipeline after an attack on Thursday, which the Kingdom attributed to drones from Iranian-backed militias in Iraq. Officials estimate that repairs, including at a major pumping facility, could take three to five weeks. While the pipeline may operate partially during repairs, the full extent of oil flow remains uncertain. Rystad Energy, a Norway-based research firm, estimates that the pipeline has been moving between 2.6 million and four million barrels per day since late August. A prolonged shutdown of this magnitude could significantly disrupt the market and necessitate a major reallocation of global crude flows.
The Houthi rebels' capture of the Hanish islands, located 160 kilometers north of the Bab el-Mandeb Strait, further threatens key shipping routes. The Bab el-Mandeb Strait is a critical choke point connecting the Red Sea to the open ocean and serves Saudi Arabia's crucial Asian markets. The rebels' advance also places them approximately 20 miles from the U.S. military base in Djibouti.
For over a month, the Houthis have targeted Saudi oil infrastructure and shipping in the Red Sea, contributing to pressure on global oil prices and bolstering Iran's position in its conflict with the U.S. These threats have kept Saudi Arabia on high alert, with daily air raid warnings. A series of Houthi ballistic missile and drone attacks on Monday wounded 13 civilians and damaged homes and vehicles, according to a Saudi military spokesman.
The Houthi advances have reportedly met with little resistance from Saudi-backed Yemeni government forces. Rebels deployed on the Hanish islands after hundreds of allied forces withdrew, according to Yemeni government and Houthi officials. Last week, the rebels also seized the port city of Mokha and Mayun Island within the Bab el-Mandeb Strait. Yemeni government forces have stated they are attempting to counter the advances with airstrikes on Houthi positions.
The Iran war has significantly impacted Saudi oil production, which the International Energy Agency reported fell to six million barrels per day in August from nearly ten million the previous year. Following the war's commencement, the East-West Pipeline carried the majority of Saudi oil exports. When Houthi attacks in the Bab el-Mandeb Strait began in late July, many tankers rerouted north through the Suez Canal or an Egyptian pipeline, increasing transit time and costs for Asian clients. Subsequently, Houthi forces expanded their targets to include Saudi shipping in the northern Red Sea.
The escalating conflict in Yemen is pushing the nation further into civil war, following a fragile truce maintained since 2022. The World Health Organization reported over 500 deaths in Yemen in the last week alone, a significant increase from the previous week, and nearly 94,000 people have been displaced. Aid organizations report that many displaced individuals lack adequate food and water, with entire villages reportedly emptied.
In parallel, Iranian Foreign Ministry spokesman Esmail Baghaei stated on Monday that Saudi Arabia had requested the postponement of a regional meeting, originally hosted by Oman, intended to discuss security in the Strait of Hormuz. Baghaei described the meeting as a "proper opportunity" and indicated that an agreement between Iran and Oman concerning the Strait of Hormuz has been finalized and will be announced later. Saudi Arabia had reportedly submitted amendments to the agreement, expressing concerns about its potential long-term implications for the Strait of Hormuz and other Gulf Cooperation Council countries.