Iran, Houthis block 2 key global shipping routes, straining the global economy - USA Today

LONDON − Iran and its allies are ramping up operations to disrupt major oil shipping lanes in the Middle East on which much of the world relies, threatening to drive up U.S. and global fuel prices further.

Iranian forces responded to President Donald Trump and Israel’s Feb. 28 attacks on the country by disrupting shipping through the Strait of Hormuz, which lies between Iran’s coast and the Arabian Peninsula. The Islamic republic’s efforts made the channel a household name as oil prices rose precipitously.

This week Iran’s allies to the south moved to shut down the other major channel in the region: the Bab el-Mandeb Strait, which lies between the Arabian Peninsula and the Horn of Africa. The Yemen-based Houthi militia announced Sept. 11 that they had seized Perim Island, a strategic isle that will allow them to control the Bab el-Mandeb.

The Houthis’ capture of Perim means Iran and their allies have effectively consolidated control over two of the most important trade chokepoints in the world, and the strain on the global economy that followed shipping disruptions through the Strait of Hormuz is now poised to grow worse.

In addition to Gulf oil exports, the two channels are used for shipping consumer goods and other commodities between Asia, Europe and beyond. Disruptions at these routes have driven up oil prices and shipping costs, creating ripple effects across the U.S. economy that extend far beyond the gas pump.

World leaders and experts have warned that continued disruptions to trade could eventually cause a global recession where tens of millions of people go hungry.

Iran has sought to disrupt shipping traffic through the Strait of Hormuz as part of its response to the U.S.-led war launched against the Gulf nation in February. Meanwhile, the Iran-aligned Houthis have disrupted shipping routes through the Red Sea for years.

But as the war in Iran has continued and led to a sharp reduction in energy shipments through the Strait of Hormuz, some major international shipping firms have rerouted their vessels through the Bab el-Mandeb Strait.

That workaround now appears to have run its course.

The Houthis are a political movement, a military force and a religious group. They have long acted as a frontline surrogate for Iran, with whom they share some strategic objectives such as wanting to drive the United States out of the Middle East. Since 2014, they have also been fighting in a civil war in Yemen against a fledgling government that is backed militarily by Saudi Arabia, the United Arab Emirates and − indirectly, through weapons supplies − the United States and Britain.

Political scientists at the the Anaween Research Center, a Yemen-headquartered public policy think tank, wrote in an analysis published Sept. 10, that the Houthis' advance on the Bab el-Mandeb Strait is likely intended, in part, to "create an additional Iranian leverage card in the Red Sea."

It could, in short, benefit Tehran in its war with Washington by restricting even more energy trade in a conflict that has already sent oil prices soaring. However, the capture of the Bab el-Mandeb Strait also suits the Houthis' contemporaneous aim of further entangling the security and energy exports of nearby Saudi Arabia in a new front.

It's already happening: Saudi Arabia's military launched two airstrikes Sept. 11 targeting the airport of the nearby Yemen port city of Mokha, which is now controlled by the Houthis, according to the Iran-backed group's Al-Masirah TV channel.

"If the Houthis manage to solidify control over Mokha ... this would not merely represent a military setback for the Yemeni government. Instead, it would create a new reality for the security of Bab al-Mandab and could transform the Yemen file from a regional negotiation issue into one of the most significant international conflict cards with Iran," the Anaween Research Center analysts wrote.

The recent developments in the Middle East caused the price of Brent crude oil, the international benchmark, to briefly jump to nearly $110 a barrel before falling to $104 on Sept. 11.“The Strait of Hormuz was already an unprecedented supply disruption, but prices remained remarkably resilient because the market found workarounds, including diverting barrels through the Red Sea and Bab el-Mandeb,” said Rebecca Babin, a senior equity trader for CIBC Private Wealth.

“Houthi escalation this week now puts that relief valve at risk,” she added. “We’ve already moved from Plan A to Plan B for getting barrels out of the region, and there really isn’t a viable Plan C.”

With the Iran war in its seventh month, energy strategist Clay Seigle said the “outlook for energy security remains bleak.”

The average price of diesel fuel surged to $6.06 per gallon, according to AAA.

“There’s also a crunch in global fuel manufacturing caused by refinery slowdowns in the Mideast, Russia, and China, and that’s pushing up prices for diesel and gasoline,” Seigle added. “All of this adds up to more inflation and higher interest rates.”