Brent crude futures jumped as much as 5% to $97.83 a barrel, while WTI traded around $95 a barrel, as renewed Iran-Israel fighting threatened to unravel a fragile US-Iran ceasefire and further disrupt energy flows.
On the maritime chokepoint front, Iran-backed Houthis declared a full ban on Israeli vessels in the southern Red Sea, warning that any Israeli ship (or linked ship) will be seen as a military target.
"First: We declare a complete and total ban on maritime navigation for the Israeli enemy in the Red Sea, and we consider all enemy movements to be military targets for our Armed Forces from the moment this statement is issued," the terror group said Monday in a statement.
The statement continued, "Second: We affirm that we will meet escalation with escalation, and that our military operations will escalate in line with events, the battle, and in conjunction with the axis of Jihad and Resistance."
"Third: We affirm the right of our people and the peoples of our free nation to confront American-Israeli aggression, and that we will not stand idly by in the face of the unjust siege imposed on our people and the peoples of the axis of Jihad and Resistance in Palestine, Gaza, Iran, Lebanon, and Iraq. All enemy attempts will fail, God willing, and our operations will continue as long as the aggression and siege against us and the axis of Jihad and Resistance continue," the statement concluded.
The announcement is similar to the Houthis' late-2023 campaign, when rebel forces attacked ships linked to Israel or bound for Israeli ports in or around the Bab-el-Mandeb Strait. They framed the attacks as retaliation for the Gaza war.
Potential disruption of the Bab-el-Mandeb Strait in the southern Red Sea will only add to the headaches for global maritime trade, as it is a critical sea route for Asia-to-Europe commerce and Gulf energy exports.
At its narrowest point, the strait is about 18 miles wide, making commercial vessels extraordinarily vulnerable to suicide drones, missiles, mines, and small boats.
The previous disruption of the Bab-el-Mandeb Strait led to ships rerouting around the Cape of Good Hope, adding time, fuel, insurance costs, and higher shipping costs. The IMF has previously said that the Red Sea attacks halved Suez Canal trade in early 2024, while shipping traffic via the Cape of Good Hope surged.
Related:
Readers were brefied in mid-April on the threat other critical straits could be disrupted. Read the note here.
The big risk here is a simultaneous disruption of both maritime chokepoints. Bab-el-Mandeb would hit the world's trade artery, while Hormuz has already disrupted the world's energy artery. Combined, the clogging of both maritime chokepoints would be viewed as a major escalation, likely raising the risk of additional supply chain stress, higher freight and insurance costs, and another inflationary wave.