The resumption of hostilities in the Red Sea is introducing fresh instability into the global oil market. On Tuesday, the Bahrain-based Joint Maritime Information Centre (JMIC) issued an advisory to commercial vessels navigating Middle Eastern waters, stating that Yemen's Houthi rebels, backed by Iran, have completed deployment for attacks on shipping near the strategic Bab al-Mandab Strait. The advisory noted that sources close to the group confirmed the positioning of missiles and drones in the area.

JMIC, which is led by the U.S. Navy and provides security updates for the region, reported this development. Concurrently, data from ship-tracking firm Kpler indicated a 34% drop in vessel traffic transiting the Bab al-Mandab Strait on Tuesday compared to Monday. This decline followed the Houthis' announcement on Monday of a maritime blockade against Saudi Arabia, with the stated aim of halting Saudi oil exports via the Red Sea and the strait.

In a related warning issued Wednesday, the European Union's naval mission in the region advised commercial vessels "associated with Israeli, U.S., or Saudi interests" to "avoid transiting the Red Sea and Gulf of Aden until the threat level decreases." The EU force relayed the Houthi declaration that "all vessels loading or discharging cargo at any Saudi port, or departing from them," are subject to the blockade.

In response to the threat, Saudi Arabia has reportedly diverted several million barrels of oil per day via pipeline to the Yanbu terminal on the Red Sea coast. Data compiled by Bloomberg shows that in the days preceding the Houthi announcement, Saudi crude exports from Red Sea terminals hit record levels. For the week ending July 17, the two terminals at Yanbu exported 5.9 million barrels per day.

Analysts at Standard Chartered, including Emily Ashford, highlighted the evolving risk in a report, stating, "The Middle East risk has evolved into a dual-chokepoint issue." They added that shipping costs for crude are likely to rise for the duration of the threat.

While the EU naval force provides escort services for civilian vessels in the Red Sea, it has cautioned that its resources are limited and ships seeking protection may face waiting periods. Unlike the Persian Gulf, the Red Sea offers an alternative northern route via the Suez Canal. However, for companies aiming to ship oil to Asia, this alternative entails significantly longer voyage times and substantially higher transportation costs.

"The stream of bad news seems relentless at the moment," remarked Sasha Foss, an analyst at CSC Commodities, part of the Marex Group. "I expect the longer the strait remains blocked, the greater the upward pressure on the market to correct, as we no longer have the buffer we once did."