By David Kopp
In recent weeks, the Houthis have solidified their positions in the port city of Al-Mokha. They are engaged with Yemeni forces in the town of Dhubab. The capture of Al-Mokha, along with the islands of Perim and Hanish, gives the Houthis significant leverage over traffic through the Bab al-Mandab Strait. This creates the potential for a second chokepoint on already strained supply chains. Oil tankers traversing the Bab al-Mandab could encounter a blockade similar to what we observe in the Strait of Hormuz. Currently, the Bab al-Mandab Strait has only experienced approximately a ten percent reduction in oil traffic due to the Houthi ban on Saudi Arabian oil tankers. The Houthis’ ties to the Iranian government could cause the blockade to intensify beyond that ten percent level as hostilities begin to reignite between Iran and the United States.
The Houthis claimed responsibility for striking the Saudi capital of Riyadh in mid-September. The United States’ refusal of Saudi requests for military support is beginning to reveal key strategic vulnerabilities for the Houthis to exploit. The United States’ reticence is likely related to a limited ceasefire reached between the United States and the Houthis on May 6, 2025. The agreement followed the seven-week U.S. bombing campaign known as Operation Rough Rider, which was intended to stop Houthi attacks on commercial shipping through the Red Sea. This ceasefire leaves the United States between a rock and a hard place because of its longstanding security relationship with Saudi Arabia. That relationship developed alongside dollar-denominated oil sales and Saudi investment in U.S. assets, a system commonly known as the “petrodollar.” A shift away from dollar-based oil trading could weaken one source of demand for the dollar, although it would not automatically end the dollar’s position as the world’s reserve currency. This uncertainty has already encouraged other economies such as the People’s Republic of China to attempt to fill the shoes of the United States. China has used significant diplomatic pressure on Iran in an attempt to de-escalate hostilities between the two parties.
It will be important to keep a close eye on the conflict to anticipate potential shocks to the oil market and conflicts that may follow. With headlines beginning to blur together and global conflicts on the rise, make sure to prioritize an opportunity to decompress. Global conflict affects every one of us. Reach out to a friend, family member, or even one of your practitioners here at Balance & Birch! Talking about current events gives you an opportunity to relieve pressure while offering the same opportunity to the person you are speaking with! Starting the conversation can be an act of selflessness. The world desires your input!