Houthi capture of Red Sea islands likely to tighten grip on oil shipping, raising fresh oil crisis

The seizure of two strategic islands, Greater and Lesser Hanish, off Yemen’s Red Sea coast by Houthi militants, reportedly fortifying the Iran-backed group’s ability to control a key shipping route, a chokepoint connecting the Red Sea to the open ocean and Saudi Arabia’s key Asian markets, has intensified concerns that the world may be lurching towards a fresh oil supply crisis.

The Houthis’ capture of these islands, situated some 160 kilometres north of the Bab al-Mandab Strait, is found to be the latest stage in their rapid advance along Yemen’s Red Sea coast, following their seizure of the port of Mokha and Perim Island, and it has left Yemen’s Saudi-backed government scrambling to reclaim territory lost in recent days.

As reported by the International Organization for Migration, the latest Houthi advance triggered a mass migration in the region, with nearly 94,000 Yemenis leaving their homes and expected to be accommodated in shelters, for which about 200 schools have been converted in south-western Yemen.

Meanwhile, more than 2,000 people have reportedly crossed the sea into Djibouti, bringing the Houthi advance to within 32 kilometres of a US military base on the Horn of Africa.

Experts warned on Monday that the closure of Saudi Arabia’s east-west pipeline, which has been vital for moving oil from the Strait of Hormuz to the Red Sea export hub of Yanbu, will further squeeze global supplies, and Rystad Energy estimated that between 2.6 million and 4 million barrels a day are now at risk of “disappearing from the market”.

Brent crude rose 1.17 per cent to $106.92 a barrel on Tuesday morning, whilst US diesel prices hit $6 a gallon for the first time last week, and Chevron’s chief executive, Mike Wirth, cautioned that the stock buffers which once shielded the world from the worst effects of an oil shock have now been “played out”, leaving the risks firmly to the upside.