The reason Bab-el-Mandeb may prove more important than Hormuz is numerical rather than geographical.
Bab-el-Mandeb is the point from which the next major shock is most likely to originate — and almost no one is prepared for it. Last Tuesday, three Houthi ballistic missiles struck the Tihamah, an Egyptian-owned cargo ship traversing the narrow 18-mile channel at Bab-el-Mandeb. A fourth missile hit the rescue vessels rushing to assist survivors. Six people were killed, marking the first maritime fatalities in the US-Iran war that has been ongoing for a year, and serving as the clearest indication to date that the Houthi blockade in the straits, active for three weeks, is no bluff. However, international news outlets treated the incident as just another Red Sea episode, while the day's attention focused on whether Washington and Tehran are closer to reopening the Strait of Hormuz. This approach, according to analysis by Modern Diplomacy, is misguided. Hormuz has remained closed for months and the situation is already priced into oil futures, settled around $87 a barrel, alongside a diplomatic stalemate that no one expects to resolve anytime soon. The next shock, however, may come from Bab-el-Mandeb.
Hormuz has already been "priced in" by markets
The war that led to the closure of Hormuz began on February 28, when US and Israeli strikes killed Iran's supreme leader and Tehran responded by drastically restricting passage through the straits. On August 9, just a single ship passed through, compared to a pre-war average of 73 ships per day, while war risk insurance premiums have surged to roughly 30 times pre-war levels. Brent crude, which was near $70 in January, has stabilized at the high end of $80. The price has not spiked to $150 because Saudi Arabia found an alternative route. The East-West pipeline is currently operating at full capacity, transporting roughly 5 million barrels per day toward the Red Sea port of Yanbu, bypassing Hormuz. This pipeline is the reason oil is not trading at $150. However, Yanbu is not the end of the journey. Cargoes heading toward Asia, the most critical market, still have to pass through Bab-el-Mandeb.
The Houthis open a new front
On July 20, three weeks before the attack on the Tihamah, the Houthis designated this maritime route a war zone following a Saudi airstrike on Sana'a airport that collapsed the fragile truce that had temporarily limited the Yemeni civil war. The reason Bab-el-Mandeb may prove more important than Hormuz is numerical rather than geographical. The disruption at Hormuz is already priced into markets. Every dealing desk, insurance firm, and central bank has maintained scenarios for a closed Hormuz for months. That is why the market is reacting to a war that has disrupted roughly 15 million barrels of daily flow with oil at $87 rather than triple digits. The remaining risk is no longer "what happens if Hormuz remains closed." Everyone assumes it will remain closed. The real question is: what happens if the alternative route fails as well? And that route passes through Bab-el-Mandeb.
The US Navy is already avoiding the straits
The US Navy appears to be acting as though it recognizes the danger, even if official rhetoric from Washington remains focused on Hormuz. In April, the USS George H.W. Bush aircraft carrier group took a 6,000-mile detour around the Cape of Good Hope rather than passing through Bab-el-Mandeb. No American aircraft carrier has attempted passage through the straits since the USS Dwight D. Eisenhower in December 2023. Currently, Washington maintains three carrier strike groups in the region, marking the largest deployment of US naval forces in the Middle East in over two decades. Yet, it routes its most valuable ships around the narrow passage that it publicly claims is secondary to Hormuz. This is the true danger signal.
America prepares in Somaliland as well
The same quiet preparation is visible on land. AFRICOM publicly maintains that the US is not seeking new military bases in the Horn of Africa, aligning with the broader trend of reducing the American military footprint. However, its commander privately visited the port of Berbera in Somaliland, a deep-water port featuring one of the longest runways in Africa. Representatives of the territory claim that an American delegation has made monthly visits ever since. The reason cited privately is not the al-Shabaab insurgency in Somalia, against which the US continues to execute roughly one airstrike per week. It is Bab-el-Mandeb. Washington is preparing for a problem it is not yet ready to acknowledge publicly.
Three fronts of destabilization
What makes the next 12 months particularly dangerous is that the region is destabilizing simultaneously across three fronts. The Ethiopian federal army and Tigray forces clashed for four days in early August near the border with Sudan. The fighting has already left Tigrayan fighters dead in a river that serves as an international boundary, while artillery fire struck refugee camps. The 2022 peace agreement, which ended a war estimated to have caused 600,000 deaths, is now showing severe signs of collapsing. At the same time, Sudan is already mired in its own civil war. None of this is happening in Yemen. However, it occurs in the same geopolitical theater, competing for the same limited resources from the US, Gulf states, and the UN, precisely when they are needed to secure maritime routes. Furthermore, the coalition of Gulf nations that would normally address a Houthi blockade continues to face its own internal rifts. Saudi Arabia effectively ended the separate military presence of the UAE in southern Yemen with airstrikes targeting Abu Dhabi-backed separatists in December. This rift remains unhealed, despite the shared threat posed by the Houthis.
The $120 scenario
The obvious counterargument is that Hormuz historically carries approximately 15 million barrels of oil per day, while Bab-el-Mandeb carries far smaller volumes. Therefore, it remains a larger issue. In absolute terms, this is correct. However, for market positioning, this is not the critical point. The worst-case scenario for Hormuz has already occurred and is factored into markets. The worst-case scenario for Bab-el-Mandeb has not yet been priced in. The attack on the Tihamah was the first time in this war that the Houthis proved they could kill crew members on a moving vessel within the straits themselves. This represents a capability escalation rather than an isolated incident. The next logical step would be an attack on a tanker that loaded at Yanbu or a US warship.
Three scenarios for the coming months
In the base scenario, with a probability of roughly 60%, the Houthis will maintain controlled and low-profile pressure, with occasional attacks like the one on the Tihamah. The objective will be to keep insurance rates high and force a portion of shipping to circumnavigate Africa, without triggering an official, total shutdown of passage. Cargoes linked to Yanbu will continue to move, albeit with higher shipping costs and periodic disruptions. Brent crude will move toward $90–$100, without an explosive spike. In the negative scenario, over the coming months, a Houthi attack — with or without deeper coordination with Iran — will strike a tanker originating from Yanbu or a US warship inside Bab-el-Mandeb. Underwriters will completely withdraw coverage, as has already occurred in Hormuz. Riyadh's last functional export route to Asia would essentially close, and Brent crude could surge past $120. Simultaneously, clashes between Ethiopia and the TPLF could escalate into a new open war, while Sudan sinks further into instability. Washington, absorbed in negotiations over Hormuz, will lack sufficient political and military bandwidth to stabilize the Horn of Africa. Consequently, strategic leverage in Somaliland could shift to whoever moves first — most likely China, which already operates a base in Djibouti, directly across the straits.
The only "quiet" exit
The positive scenario envisions either a partial reopening of Hormuz, which would immediately relieve pressure on Bab-el-Mandeb by restoring the normal transit route for Gulf oil, or a firmer US-Saudi response. Following the deaths on the Tihamah, the US and Saudi Arabia could destroy a significant portion of Houthi missile assets and drones, restoring enough confidence in shipping to contain the blockade without a comprehensive agreement on Yemen. Both pathways could limit the risk without requiring the spectacular diplomatic breakthrough currently anticipated by markets.
Insurers may warn first
Market focus remains fixed on the strait that has already collapsed. Yet the strait that has not yet fallen, but is being actively tested by a force that just proved it is willing to kill to close it, sits in a region crumbling across three separate fronts. This is the exposure that investors, insurers, and governments should be pricing in now, rather than waiting for the next strike to occur. The critical barometer is the listings of Lloyd's Joint War Committee. If Bab-el-Mandeb is upgraded in the coming weeks to the same risk designation as Hormuz, insurers — rather than diplomats — will have been the first to signal that the strait no one was watching has become the most vital point in global trade.
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