Oil crisis deepens as Iran targets alternative routes, Houthis hold global markets hostage

Iran's decision to close the Strait of Hormuz has forced the oil-producing states of the Gulf into a desperate scramble for alternatives. Saudi Arabia and the United Arab Emirates have begun routing their exports through the Red Sea, a move that seemed, at first, like a workable solution to a catastrophic problem. But the geography that offers escape also presents a new vulnerability—one that Iran appears determined to exploit.

The numbers tell the story of how constrained the options really are. Saudi Arabia can redirect roughly five million barrels per day through Yanbu, its largest Red Sea port, accounting for about two-thirds of its total exports. The UAE can push another 1.5 million barrels daily through Fujairah. Together, these two routes might recover a third of the twenty million barrels that flowed through Hormuz before Iran closed it. That leaves a gap of roughly thirteen million barrels with nowhere to go—a shortfall that no alternative route can fully bridge. For now, the market has accepted this partial solution as better than total collapse. But the relief may be temporary.

On Monday, a drone strike hit Fujairah, igniting what local authorities described as a large fire in the oil industries zone. The attack carried an unmistakable message: Iran is not content to let these workarounds succeed. By targeting the UAE's export terminal, Iran signaled its willingness to choke off the alternatives just as it has choked off the primary route. Yanbu, meanwhile, sits well within range of the missiles possessed by the Houthi movement, the Iranian-backed rebel force that controls large swaths of Yemen, including the capital. Dozens of tankers are already crossing the Indian Ocean toward Yanbu, and they will have to pass through the Bab el-Mandeb strait—the narrow waterway where the Houthis maintain their position.

The Houthis have demonstrated both the capability and the willingness to disrupt maritime traffic. Between 2022 and 2024, their attacks reduced container vessel traffic through the Red Sea by ninety percent. They have struck at oil installations in Yanbu at least twice, in 2021 and 2022. They possess Iranian-supplied missiles and have shown no hesitation in using them. So far, they have remained outside Iran's retaliatory campaign against the Strait of Hormuz closure. But the temptation before them is extraordinary. If the Houthis were to attack the tanker convoys heading for Yanbu and seal off the Bab el-Mandeb, they would simultaneously close both major routes by which oil can leave the Gulf. Iran has spent years arming them and positioning advisers precisely for this contingency. The potential outcome—a double closure of Hormuz and Bab el-Mandeb—would be, in strategic terms, a masterstroke, one capable of sending oil prices into a panic spiral.

Yet the Houthis face a calculation more complex than simple alliance with Iran. They share Iran's Shia faith, but they belong to a different sect, Zaydism, and the question of whether they view Mojtaba Khamenei, the new supreme leader, with the same deference they may have shown his predecessor remains uncertain. More pressingly, they know that any attack on tanker convoys would bring immediate retaliation not only from Iran's enemies but from Saudi Arabia as well. The United States and Israel have struck Houthi positions repeatedly. Saudi Arabia has done the same. The Houthis have absorbed these strikes before, but the stakes have never been higher. A decision to close the Red Sea would invite a response of unprecedented severity.

Abdul Malik al-Houthi, the movement's leader, now holds a position of extraordinary power for an Arab rebel commander. His choice will ripple across global markets and affect the price consumers pay at the pump. The tankers are already in motion, heading toward the Red Sea. The window for decision is closing. Whether the Houthis will seize the moment—or whether the fear of retaliation will stay their hand—remains the question that could determine whether the oil crisis deepens into something far worse.