Since late 2023, Houthi attacks on commercial shipping in the Red Sea and Bab el-Mandeb strait have forced a massive rerouting of global oil and container traffic. The disruptions have added costs and transit time to critical energy supply chains.
Scale of the Disruption
Before the attacks, approximately 4.8 million barrels per day of crude oil and refined products transited the Bab el-Mandeb strait — the southern entrance to the Red Sea and Suez Canal. An estimated 60% of tanker traffic has been rerouted around the Cape of Good Hope, adding 10-14 days of transit time and significant fuel costs.
Price Impact
The rerouting adds an estimated $1-2 per barrel to crude oil delivery costs for cargoes moving between the Middle East/Asia and Europe. This cost premium flows through to refined product prices, including gasoline and diesel at the pump. Insurance rates for vessels transiting the Red Sea have also increased dramatically.
Geopolitics
Oil Prices
Gas Prices
Geopolitics
Markets
Market participants continue to evaluate the interplay between geopolitical events, supply fundamentals, and demand signals across global energy markets. The current environment combines elevated uncertainty on multiple fronts with relatively disciplined producer behavior, creating conditions where small changes in perceived supply risk translate to meaningful price movements. Forward volatility remains elevated across both oil and natural gas benchmarks.
Longer-term structural trends provide the backdrop against which short-term volatility plays out. Energy transition policies, consumer demand patterns, and capital discipline across the industry combine to shape the pace of supply response to price signals. These structural factors suggest continued price volatility over the medium term, with both upside risks from supply disruption and downside risks from slower-than-expected demand growth.