Iran has instructed Houthi forces in Yemen to prepare for a potential closure of the Bab el-Mandeb Strait, a chokepoint for global oil shipments. The directive, confirmed by regional sources, comes as prediction markets show a 5.3% probability that West Texas Intermediate crude will hit $110 a barrel by July 2026.
Why the Strait Matters
The Bab el-Mandeb connects the Red Sea to the Gulf of Aden. Roughly 7 million barrels of oil and petroleum products pass through it daily, heading to Europe, Asia, and the Americas. A closure would force tankers to reroute around the Cape of Good Hope, adding weeks to transit times and pushing up shipping costs. Iran's move signals it's willing to use the Houthis to pressure Saudi Arabia and its allies, as well as global energy markets.
Market Signals
Prediction markets, where traders bet on future events, now put a 5.3% chance on WTI crude reaching $110 by mid-2026. That's a small but notable shift from earlier this year, when the probability sat below 2%. The bet reflects growing concern that a Bab el-Mandeb closure could coincide with other supply disruptions — from OPEC+ cuts to sanctions on Russian oil. WTI currently trades around $78 a barrel.
What's at Stake
If the strait closes, oil prices could spike quickly. The 5.3% probability doesn't mean it's likely, but it's high enough for traders to start pricing in some risk. Iran's instruction to the Houthis isn't an order to act immediately — it's a preparation. The group has attacked Saudi oil infrastructure before, but a full strait blockade would be a major escalation. The Houthis have the capability: anti-ship missiles, drones, and naval mines. Whether they follow through depends on Iran's calculus and the response from the U.S. and its allies.
The next few weeks will show if the Houthis actually move assets into position. For now, the oil market is watching — and betting.
