Oil market jittery as US blocks Iran’s exports, Houthis threaten Red Sea oil route

GLOBAL oil markets are on edge following the enforcement of a U.S. naval blockade designed to curb Iran’s oil revenues. While the move is intended to pressure Tehran economically, it also raises the risk of military escalation and presents significant challenges for enforcement in and around the Strait of Hormuz, according to Oilprice.com.

The impact is already visible in energy markets, with physical crude prices climbing sharply amid fears of tighter supply and potential disruptions. Analysts warn that any Iranian retaliation, including threats to the Bab el-Mandeb Strait, could put as much as 12 percent of global energy flows at risk.

The blockade was implemented after diplomatic efforts between U.S. and Iranian negotiators collapsed over the weekend. It places American naval forces in a difficult position to either confront potential threats near Iranian waters or remain at a distance and attempt to intercept vessels farther out at sea.

The policy marks a renewed push by US President Donald Trump to force concessions from Iran, particularly over its nuclear ambitions. It follows weeks of sustained air strikes and longstanding economic sanctions targeting the country.

READ ALSO: Iran shuts Strait of Hormuz again as US continues to block its ports

From a military standpoint, the U.S. maintains a strong naval and air presence in the region, but enforcing a blockade in the narrow Strait of Hormuz could expose its assets to Iranian drones, missiles, and fast attack boats. Although recent U.S. and Israeli strikes have weakened Iran’s broader capabilities, the Islamic Revolutionary Guards Corps (IRGC) retains agile naval units capable of disrupting shipping.

Trump reinforced the hardline stance, warning that any vessel approaching the blockade would be ‘immediately eliminated.’ However, experts suggest that the U.S. could attempt to enforce restrictions from outside the Persian Gulf to reduce risks, though this would require monitoring a much larger maritime area.

Analysts remain skeptical about the effectiveness of a distant blockade. Policing wider waters would stretch U.S. naval capacity, especially given the challenges posed by civilian ships that may attempt to evade detection. Experts note that the U.S. Navy lacks sufficient smaller vessels for such operations, potentially forcing it to deploy high-end warships for routine enforcement.

Economically, the strategy is aimed at cutting off a major source of Iranian government revenue, with oil exports, particularly to China, accounting for a significant share of its budget. However, reducing Iranian supply could tighten an already constrained global market, pushing prices even higher.

The effect was immediate, with crude prices in Europe surging toward $150 per barrel shortly after the announcement, while benchmark Brent climbed above $100. Thde Brent price fell to $94.76 as at the time of going to the press on Monday afternoon (West African time).

Analysts warn that sustained price increases could ripple across global economies, including the United States, where higher fuel costs may weigh on consumers.

Iran’s own actions have compounded the crisis. Its near-total restriction of shipping through the Strait of Hormuz has already strained global trade in oil, gas, and other key commodities. Despite ongoing conflict, the country had maintained strong export levels in recent months, highlighting the potential impact of any successful blockade.

There are also broader geopolitical implications. While much of Iran’s oil is shipped via ‘shadow fleets’ using flags of convenience, uncertainty remains over how the blockade will affect vessels linked to major economies such as China. Any U.S. move to intercept or seize such ships could spark diplomatic tensions, particularly ahead of high-level engagements between Washington and Beijing.

Although China may cushion the immediate impact through stockpiles and alternative supply sources, replacing discounted Iranian crude could increase costs for its refiners.

Houthis’ threat to shut down Bab el-Mandeb

Meanwhile, Iran-aligned Houthi forces warned they could shut down the Bab el-Mandeb Strait, a critical passage for oil shipments through the Red Sea that remains operational for crude exports from the region.

READ ALSO: Iraq engages Iran over Strait of Hormuz oil passage

Houthi Deputy Foreign Minister, Mr Hussein al-Ezzi, speaking via social media, said that if authorities in Sana’a decide to close the strait, no force would be capable of reopening it. He also called on Trump and global actors to abandon policies he claimed are undermining peace and to respect the rights of the Yemeni people.

The situation followed a brief lull on Friday, when Iran announced the reopening of the Strait of Hormuz. However, by Saturday, Tehran reversed course, declaring the waterway closed again amid an ongoing U.S. naval blockade aimed at restricting Iranian oil exports.

Oil markets reacted sharply to the developments. After dropping by around 10 percent on Friday, prices rebounded early Monday as shipping through key chokepoints remained constrained. The rebound was further fueled by reports that the U.S. Navy had intercepted an Iranian vessel suspected of attempting to breach the blockade.

That seizure heightened fears of a deeper escalation and the possibility of prolonged disruptions in the Strait of Hormuz, a vital artery for global energy supply. Investors who had anticipated a quick resolution to the crisis began reassessing their positions.

Analysts at ING noted that the temporary easing of tensions proved short-lived, with Brent crude opening stronger on Monday. They pointed out that Iran’s renewed restrictions on Hormuz, combined with continued U.S. enforcement of its blockade, have cast doubt over any imminent peace negotiations.

The Houthi threat to block the Bab el-Mandeb Strait adds another layer of risk to global oil flows. Such a move could halt shipments from Saudi Arabia, which had already rerouted much of its crude exports to the Red Sea port of Yanbu in response to disruptions in the Strait of Hormuz.