Investors focused on the possibility of renewed hostilities in the Iran conflict risk overlooking another growing threat to energy markets: the war between Yemen’s Houthis and Saudi Arabia, according to Jefferies’ latest GREED & fear note.
The conflict has potentially serious implications for crude oil supplies and global shipping, with the Houthis appearing to have control of the Bab al-Mandab Strait, a strategic chokepoint connecting the Red Sea to the Gulf of Aden. The group has also expanded its attacks beyond Saudi Arabia’s East-West oil pipeline to refineries in the western part of the country and Riyadh airport, the report said.
Jefferies warned that the conflict is more complicated than the Houthis simply acting as an Iranian proxy and could pose a greater threat to Saudi Arabia's stability than investors assume.
The Bab al-Mandab Strait is a key shipping route for oil and other goods travelling between the Red Sea and the Gulf of Aden, making it an important link between Asian, European and Middle Eastern markets.
Any disruption to traffic through the chokepoint could force vessels to take longer routes, raising freight costs, extending delivery times and adding to pressure on global supply chains. For energy markets, prolonged disruption could also complicate crude oil and petroleum product flows.