Oil prices climb as dual chokepoint threats roil markets

Oil prices rose sharply on Tuesday as escalating threats to both the Strait of Hormuz and the Bab el-Mandeb Strait intensified fears of a broader disruption to global energy flows. WTI crude climbed more than 2% to around $84.50 per barrel, extending a rally that has pushed prices to multi-week highs amid unresolved Middle East tensions.oilprice+1

The gains came as markets digested a confluence of supply risks: Iran's continued obstruction of the Strait of Hormuz, which normally carries 20% of the world's oil and gas, and fresh threats to the Red Sea's Bab el-Mandeb Strait, which has served as a critical alternative route for energy shipments since the Hormuz standoff began.reuters+1

Dual Chokepoint Risk

Reuters reported on July 16 that Iran had instructed Yemen's Houthi movement to stand ready to close the Red Sea oil route if the United States strikes Iranian power infrastructure, citing three sources familiar with the matter. A source close to the Houthis said the group had completed preparations to attack shipping by deploying missiles and drones near Bab el-Mandeb.english.aawsat+1

The threat compounds an already severe supply picture. The Strait of Hormuz has been effectively blocked since early 2026 as part of the US-Iran conflict, while the Bab el-Mandeb has grown in importance as an alternative route. Crude oil and condensate transiting the Bab el-Mandeb increased from 3.7 million barrels per day in the first quarter of 2025 to 5.4 million in recent months.time

IEA Warning and Inventory Pressures

IEA Executive Director Fatih Birol warned that threats to the Bab el-Mandeb are adding to mounting risks facing global energy markets. A full and unconditional reopening of the Strait of Hormuz remains essential to prevent further deterioration in global energy security, he said.turkiyetoday+1

The supply picture is further strained by depleted reserves. The US Strategic Petroleum Reserve fell to roughly 340 million barrels — its lowest since 1983 — after the Trump administration released tens of millions of barrels to tame surging fuel prices. Commercial crude inventories have also declined to levels not seen since early 2025.axios+2

Market Outlook

WTI crude futures have trended consistently higher throughout July after rebounding from late June lows. Brent crude was trading near $88 per barrel as of Sunday, with Tuesday's session extending the upward momentum. Analysts have warned that if both waterways were effectively closed, it could obstruct roughly 25% of global oil and gas supply, a scenario that would send prices far higher from current levels.cmegroup+2

The IEA noted that while increased LNG exports from the United States and Canada have offset about 70% of lost supply that would normally transit the Strait of Hormuz, prolonged disruptions could keep markets tight and hinder Europe from rebuilding gas inventories ahead of winter.egyptoil-gas