Iran War Roils Energy Markets as Houthis Battle for Red Sea Control

Brent crude oil hovered near $100 a barrel on Monday as the war between Iran and the United States deepened its grip on global energy markets, with Yemen's competing forces battling for control of the Red Sea's most critical shipping lanes. The Houthis, backed by Iran, launched coordinated strikes across Saudi Arabia—hitting Riyadh's international airport, an Aramco refinery in Rabigh, and military installations—while the Saudi-backed Yemeni government announced a sweeping offensive aimed at reclaiming the capital city of Sanaa after more than a decade of Houthi control. The fighting in Yemen's Taiz province alone killed more than 70 people in a single day, according to sources from both sides.

What makes this escalation particularly consequential for the world economy is the geography of the conflict. The Bab el-Mandeb Strait, where much of this fighting is concentrated, sits at the southern gateway to the Red Sea and serves as a chokepoint for roughly one-fifth of global oil and gas shipments. The Houthis have seized swathes of coastline along this waterway in what Yemen's deadliest fighting in years, and both sides now claim control over the strait itself. Meanwhile, in the Persian Gulf, the Strait of Hormuz remains contested ground: three tankers were struck by unknown projectiles over the weekend, and on Monday a vessel was turned back after Iranian Revolutionary Guard forces threatened to target it if it did not comply with their orders.

Yet the picture is more complicated than simple scarcity. Maritime intelligence firm Kpler reported that Middle East oil exports from producers other than Iran surpassed pre-war levels in September, with weekly shipments reaching at least 16.5 million barrels per day—exceeding the pre-conflict average for the first time since the U.S. and Israel launched their offensive against Iran in late February. Producers have adapted by routing forty percent of crude around the Hormuz blockade, using Saudi and United Arab Emirates pipelines and the Red Sea itself as alternatives. The problem is that this fragile recovery depends entirely on the continuation of these workarounds, and the escalating violence in Yemen threatens to close them off. Amin Nasser, chief executive of Saudi Aramco, told the Energy Intelligence Forum in London that global oil stockpiles are "scarily thin" and that "the system is already straining."

The uncertainty extends to Saudi Arabia's own infrastructure. On Sunday, the Houthis struck the East-West Crude Oil Pipeline, which runs roughly 700 miles from the kingdom's main oil fields in the east to the Yanbu terminal on the Red Sea. One energy sector source told the French news agency AFP that a pumping station east of Riyadh in Khurais suffered "big damage" and that the pipeline had stopped flowing. Reuters and Bloomberg, citing unnamed sources, reported that oil was still moving through the line. The conflicting accounts underscore how little visibility exists into the actual state of critical infrastructure during active warfare.

Back home, the price spikes have become a political liability for Republicans heading into midterm elections. Diesel fuel hit $6.53 a gallon last month and has only eased slightly since. On Monday, President Trump signed an executive order in Nebraska to ease restrictions on tax-free red dye diesel, a move he said would save truckers more than $100 per fill-up and help drive down the cost of goods. He also blamed Ukrainian strikes on Russian oil refineries and California's closure of refineries for the high prices, rather than the Iran war itself, even as his own Energy Secretary Chris Wright acknowledged that Trump had been "well aware of the risks to energy flows" before launching the conflict.

Diplomatic efforts remain stalled. Iran's President Masoud Pezeshkian said negotiations with the U.S. were "meaningless," claiming the Americans had attacked Iran three times after talks and were seeking regime change, not dialogue. Iran's foreign minister, Abbas Araghchi, insisted that only negotiations "based on justice and fairness" could end the war, vowing that Iran would respond with "even more force" if the U.S. resumed military operations. The two sides have been deadlocked since Iranian attacks on vessels in the Strait of Hormuz prompted the U.S. to resume military operations in September. Trump rejected Tehran's proposed conditions for reopening the strait while leaving the door open to further talks or renewed strikes.

Regional powers are moving to shore up their defenses. Turkey and Pakistan announced they would undertake a "rapid deployment" of troops to Saudi Arabia as part of a new mutual defense alliance, following a meeting in Riyadh. The U.S. approved $1 billion in arms sales to the United Arab Emirates and $400 million in repair services for Kuwait's Patriot missiles, both Gulf states that have been repeatedly targeted by Iranian drones and missiles. The Houthis, meanwhile, warned airlines against operating in Saudi Arabian airspace, declaring that "the skies of Saudi Arabia will be a theater for operations" and accepting "no responsibility" for what happens to aircraft.

The human toll continues to mount. U.S. soldiers wounded in an Iranian drone strike on Port Shuaiba in Kuwait on March 1—which killed six American troops and was the deadliest Iranian attack on U.S. forces—have raised concerns publicly that commanders underestimated the threat and that the military medical system failed them. In Iran, executions have risen sharply since the war began; two men were hanged Monday for involvement in the deaths of four police officers during protests, and Iran more than doubled its number of executions in 2025 compared to the previous year. The United Nations Secretary-General António Guterres expressed deep concern about the "sharp escalation" in Yemen, condemning Houthi cross-border attacks while the fighting shows no signs of abating.