EXPLAINER: What the Iran-aligned Houthis' threat on Red Sea shipping could mean for the oil market

Yemen’s Iran-aligned Houthi movement said on Monday it would ban ships linked to Israel from transiting the Red Sea, following renewed Israeli military strikes on Iran. The announcement has intensified concerns over global shipping routes and the stability of energy markets already strained by conflict in the Middle East.

The move comes amid growing uncertainty about the wider Iran-Israel confrontation and its potential spillover effects on critical maritime corridors, including the Red Sea and the Strait of Hormuz—both vital for global oil and liquefied natural gas flows.

Rising Risks to Global Energy Markets

The escalation adds another layer of risk to global energy supplies, particularly as disruptions in key shipping lanes continue to ripple through oil markets.

Since February 28, when Israel and the United States launched attacks on Iran, Tehran’s actions around the Strait of Hormuz have significantly disrupted oil and energy exports from the Gulf. The resulting bottlenecks have contributed to higher prices and renewed volatility in global energy markets.

In response, Saudi Arabia has redirected more than 70% of its usual crude oil exports through the Red Sea port of Yanbu, helping stabilize supply flows and limit a sharper spike in global oil prices.

However, analysts warn that sustained disruptions in the Red Sea could quickly reverse those gains. Unlike previous periods of unrest, much of the Gulf’s crude is now physically moving through Red Sea shipping lanes, increasing vulnerability to attacks or blockades.

During the Houthis’ earlier campaign against Red Sea shipping in late 2023, oil exports from the Gulf continued to flow, even as vessels were rerouted around Africa. Today, the stakes are higher because a larger share of global energy supply is directly exposed to the region.

A Houthi source told Reuters that restricting Israeli-linked shipping was “a first step,” adding that further escalation could lead to broader restrictions on vessels bound for Israel and additional measures targeting maritime traffic.

In previous operations, the group targeted ships linked to Israel or companies using Israeli ports, actions that led many global shipping firms to avoid the Red Sea route entirely.

Who Are the Houthis?

The Houthis are a political, military, and religious movement that emerged in northern Yemen in the 1990s. Originally formed to challenge the Yemeni government in Sanaa, the group follows the Zaydi branch of Shiite Islam.

Following the 2011 Arab Spring, the Houthis gained momentum amid political instability and seized Yemen’s capital in 2014, derailing a Gulf-backed transition plan.

In response, a Saudi-led coalition intervened militarily in 2015 to restore the internationally recognized government, viewing the Houthis as a proxy force for Iran. The conflict evolved into a prolonged civil war marked by missile and drone attacks on Saudi and Emirati infrastructure.

Although a 2022 truce between Yemen’s warring parties has largely held, the group remains a powerful force in northern Yemen and continues to influence regional security dynamics.

Are the Houthis an Iranian Proxy?

Iran considers the Houthis part of its broader “Axis of Resistance,” which also includes Hezbollah in Lebanon and various Shiite militias in Iraq. However, the relationship is considered less structured than Iran’s ties with those groups.

Unlike Hezbollah, the Houthis do not formally recognize Iran’s supreme leader as their ultimate religious authority. While ideologically aligned with Tehran, the group is driven primarily by domestic Yemeni objectives.

The United States and its allies accuse Iran of providing weapons, training, and financial support to the Houthis, often with assistance from Hezbollah. The Houthis deny being an Iranian proxy, insisting they develop their own military capabilities.

Previous Red Sea Attacks and Global Impact

Following the Hamas attack on Israel on October 7, 2023, and Israel’s subsequent military campaign in Gaza, the Houthis began targeting both Israel and commercial shipping in the Red Sea, stating they were acting in solidarity with Palestinians.

The attacks severely disrupted one of the world’s most important shipping corridors. Major global shipping companies, including Maersk and Hapag-Lloyd, were forced to reroute vessels around the southern tip of Africa, significantly increasing travel times and costs.

A U.S.-led naval coalition was later formed to secure the waterway, conducting defensive operations and strikes on Houthi targets while intercepting hundreds of drones and missiles. Despite these efforts, intermittent attacks continued until a ceasefire in Gaza in October helped reduce hostilities.

Current Role in the Iran-Israel Conflict

Since the latest escalation between Iran and Israel, other Iran-aligned groups such as Hezbollah and Iraqi militias have already engaged in attacks. The Houthis, however, have remained relatively restrained.

Houthi leader Abdul Malik al-Houthi said in early March that the group remained prepared for escalation, stating, “Our fingers are on the trigger at any moment should developments warrant it.”

Iranian officials have also warned that the Houthis could play a role in expanding pressure on Western and Israeli interests in the region, including the possibility of disrupting Red Sea shipping.

Despite these warnings, the group’s involvement so far has been limited to a small number of missile and drone strikes against Israel earlier this year.

Analysts suggest several possible reasons for the relative restraint, including strategic caution to preserve leverage, uncertainty over direct confrontation with Western forces, and a desire to avoid provoking neighboring Saudi Arabia, with whom tensions have only recently eased.

For now, the situation leaves global shipping and energy markets on alert, as the threat of renewed disruption in the Red Sea continues to loom over one of the world’s most critical trade arteries. -Compiled by Angus McDowall; editing by Jason Neely/Reuters