The Bab el-Mandeb Strait sounds like a Game of Thrones character who got cut in post-production. It's a 20-mile-wide waterway between Yemen and Djibouti that handles about 10% of global oil traffic. Iran's Houthi allies could maybe start attacking ships there. Oil prices would spike. Retail traders are currently Googling "Where is Yemen" and feeling very informed.
The brilliance of this threat is that it already happened in 2018 and 2019. The Houthis attacked Saudi tankers. Oil did nothing. But this time feels different because financial journalists need content and Bloomberg terminals don't fill themselves. Iran controls the Houthis like a divorced dad controls his weekend visitation schedule—theoretically influential, mostly theoretical.
The Bab el-Mandeb connects the Red Sea to the Gulf of Aden. It's the fourth-largest oil choke point globally. Millions of barrels pass through daily. None of this matters to your portfolio because by the time you read about a choke point vulnerability, seventeen hedge funds already priced it in, took profit, and moved on to front-running semiconductor tariffs.
Iran keeps threatening to disrupt oil shipping like it's their brand identity. They've got the Strait of Hormuz on the other side of the Arabian Peninsula handling 20% of global oil. They could theoretically shut down both straits simultaneously. They won't. Because then what would they threaten next month? You can't build an entire foreign policy around intimidation and then actually follow through. That's called war. Wars require budgets and PowerPoints.
The article warns that oil prices would spike. Prices spike when a celebrity tweets. Prices spike when a pipeline sneezes. Prices spike when traders need to justify their bonus structure. The beauty of oil markets is that every threat is priced in until it happens, then it wasn't priced in enough, then it's overpriced, then we're back to wondering why gas costs four dollars.
Retail traders will buy USO calls on this headline. Iran will issue another statement. The Houthis will maybe fire at a tanker. The tanker will keep moving. Your calls will expire worthless. The Bab el-Mandeb Strait will remain exactly as strategically vulnerable as it was when you didn't know it existed.
Photo by Abolhassan Neghabi on Unsplash
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