#Gate广场四月发帖挑战

Oil prices receive another "positive" boost - Iran's Foreign Minister threatens to block the Strait of Mandeb

As early as two weeks ago, during the tense US-Iran confrontation, Iran threatened to open a second front at the Strait of Mandeb. Now, this threat may become a reality. According to a report on the NBC News website on April 3, Iran's Parliament Speaker Mohammad Bagher Ghalibaf seems to have threatened to block the commercial shipping traffic through the strategic Strait of Mandeb. Ghalibaf posted on social platform X, asking, “What share of the world's oil, liquefied natural gas, wheat, rice, and fertilizers are transported through the Strait of Mandeb?” He then wrote, “Which countries and companies have the highest proportion of shipments passing through this strait?” In recent years, ships passing through this area have repeatedly been attacked by the Houthi armed group in Yemen, which is allied with the Iranian regime.

The importance of the Strait of Mandeb

The Strait of Mandeb is a crucial waterway connecting the Red Sea and the Gulf of Aden, regarded as a “water corridor” linking Europe, Asia, and Africa, with its narrowest point only about 30 kilometers wide. The Strait of Mandeb is comparable to the Strait of Hormuz in the Persian Gulf for the Red Sea. As shown in the diagram below, the strait guards the throat of the passage from the Red Sea into the Arabian Sea. Currently, about 12% of global trade transportation and an equivalent proportion of maritime oil trade pass through here. Before the US-Iran war, the region’s daily oil transport exceeded 4 million barrels, accounting for over 5% of global maritime oil trade. After the outbreak of the US-Iran conflict, due to the closure of the Strait of Hormuz, the Red Sea took on the entire shipping capacity for Middle Eastern oil exports. Today, the Saudi oil pipeline, regarded as a global energy lifeline, transports oil through the Red Sea with a capacity of over 7 million barrels per day.

Why Iran is confident it can control the Strait of Mandeb

This brings us to the Houthi armed group in Yemen. As shown on the map below, the Houthis are located on one side of the Strait of Mandeb and have the capability to strike the shipping lanes from the Red Sea to the Strait of Mandeb. As Iran’s allies, they are also willing to be driven by Iran. During the recent Israel-Palestine conflict, the Houthis have repeatedly attacked ships related to Israel passing through the Red Sea.

Impact on oil prices - after the worst, there’s nothing to fear

Currently, oil prices have surged due to the blockage of the Strait of Hormuz, with Brent crude briefly surpassing $140 per barrel. If the Strait of Mandeb is also blocked, the global daily oil shortfall could reach 24 million barrels, causing oil prices to further spike in the short term. WTI crude could challenge the $118-$120 level.

However, it’s important to remember that “extremes often reverse.” Once the Strait of Mandeb is blocked, it may be the worst outcome of this Middle East war-induced oil crisis. After darkness comes dawn. “The blockade of the Strait of Mandeb” could be the last dance for the bulls, and oil prices might peak. It could be an ideal time for bullish traders to take profits. Moving forward, as the war deepens, whether the Strait of Hormuz is reopened or the G7 releases strategic oil reserves, oil prices are likely to return to a long-term equilibrium of $70-$80.

What do you think about short-term oil prices? Do you agree with what Little God of Wealth said? If not, come and “blast me” 😀