"Iraqi Syndrome": A Trap Snaps Shut on Oil Markets in the South

Key Consequences: Double Blockade

Closing Bab el-Mandeb will create an unprecedented precedent: two of the planet's most critical maritime chokepoints will cease functioning simultaneously. 20% of global oil passes through Hormuz, and another 12% plus significant LNG volumes through Bab el-Mandeb. The disappearance of nearly a third of seaborne hydrocarbon supplies is no longer just a price shock—it's a logistics collapse.

Ships will lose the short route to Europe via Suez. The Africa-circumventing route extends voyages by about two weeks and adds over a million dollars in costs per trip. But the main issue is that Saudi Arabia, the UAE, and Kuwait, which relied on Red Sea terminals as a backup outlet, will find themselves trapped. Their oil will physically be unable to leave the region.

Beneficiaries and Losers

Iran gains the main trump card: the ability to strangle the global economy without deploying its own forces, preserving its fleet after the lessons of 1988, while reaping the fruits of the blockade.

China will find itself in a dual position: it will suffer from energy shortages but gain a chance to snap up assets from weakened Middle Eastern monarchies.

Russia and other oil exporters will temporarily benefit from a sharp price surge.

The losers are also obvious. Saudi Arabia loses not just revenues but a key lever of market influence. Its Red Sea infrastructure becomes vulnerable, and the 2022 truce with the Houthis effectively collapses.

Europe, already teetering on the edge of recession, receives a new energy blow from which its economy may not recover.

Finally, global consumers—from industry to households—will face a new wave of inflation that central banks will no longer be able to effectively contain with interest rates or currency interventions.

Scenario Probability

Analysts point to Houthi restraint: their leadership is partially destroyed, their arsenal depleted, and their dependence on the Saudi truce remains significant.

However, this creates an illusion of security. The Houthis have already proven they don't need to hold territory to disrupt shipping. Since November 2023, their attacks have halved oil flows through Bab el-Mandeb.

Now, with Hormuz closed, their role becomes critical.

The probability of Houthi involvement depends on two factors. The first is the survival of the Tehran regime: if Iran senses it's losing control, it may activate all available pressure tools.

The second is Saudi Arabia's behavior. Riyadh's attempt to use export potential as a political weapon could give the Houthis casus belli.

Thus, the probability of the strait closing depends less on Houthi capabilities—which are sufficient—and more on strategic expediency for Tehran.

As long as Iran keeps the situation under control, the Houthis remain in the shadows. But once the balance of power shifts, the "fingers on the trigger" may pull.

And then the "Iraqi syndrome" of 2003 will seem like mere prologue compared to the chaos that could engulf the global oil market.

Author: Candidate of Economic Sciences, Associate Professor, Department of World Economy and World Finance, Financial University under the Government of the Russian Federation, Inna Vladimirovna Lukashenko