The Middle East war has acquired another front, or more accurately an old front has suddenly become hot again. Yemen's internationally recognised government has announced a major offensive aimed at retaking Houthi-controlled territory, with officials saying that more than 100,000 Yemeni troops could ultimately be mobilised. Saudi Arabia is expected to provide air support, while the United States is reportedly supplying intelligence and targeting assistance without, at least for now, directly entering the fighting.
Michael Snyder (link below), understandably sees this as another major escalation in what has already become a sprawling regional war. He may be too confident in predicting where the fighting ultimately leads, but on one point there should be little argument: Yemen matters far beyond Yemen because it sits beside one of the great arteries of world trade.
The Houthis have increased their control around the Bab el-Mandeb Strait, the narrow southern entrance to the Red Sea. Saudi Arabia has therefore reached the point where renewed negotiations conducted while the Houthis possess this strategic leverage apparently look worse than renewed war. That is a grim calculation considering how unsuccessful previous attempts to defeat the Houthis have been.
For the rest of us, watch the oil. There are now two great energy chokepoints caught up in the same regional conflict. Bab el-Mandeb controls access between the Indian Ocean and the Red Sea and hence towards the Suez Canal. Farther east lies the Strait of Hormuz, the far more important oil artery between the Persian Gulf and the Arabian Sea.
Before the present disruptions, around 20 million barrels of crude oil and petroleum products passed through Hormuz each day. According to the International Energy Agency, that represented about 25 percent of the world's seaborne oil trade. Nearly 15 million barrels a day of crude alone passed through it in 2025, amounting to roughly one-third of internationally traded crude. There is no adequate substitute.
Saudi Arabia can divert some crude westward through its East-West pipeline to the Red Sea, while the United Arab Emirates has a pipeline terminating at Fujairah outside Hormuz. The IEA estimates that perhaps 3.5 to 5.5 million barrels a day could be redirected through alternative routes. That is useful emergency capacity, but it is nowhere near the roughly 20 million barrels normally passing through Hormuz. This is why every escalation around Iran, Saudi Arabia, Yemen and the Gulf ultimately becomes an oil story.
The curious feature of the present moment is that the oil market has been remarkably resilient. Middle Eastern crude exports recovered strongly during September despite the war. Reuters reports that on several days late in the month exports actually exceeded pre-war levels, while the average at the beginning of October was around 18.5 million barrels per day compared with roughly 18 million before the US-Israeli conflict with Iran began in February.
Brent crude consequently has not responded to every new missile or drone with another enormous price explosion. Increased exports, emergency reserves and adaptation by producers and shippers have provided a buffer. G7 governments have coordinated releases from emergency stocks, while Saudi Arabia has been pushing exports through whatever routes remain available. Brent was trading a little above $100 a barrel as this latest escalation developed.
That should not be mistaken for safety. What the market has demonstrated is its ability to adapt while enough oil continues moving. Tankers change routes. Insurers reprice risk. Governments release reserves. Saudi Arabia diverts exports. Buyers find different suppliers. All of these mechanisms can absorb shocks. They cannot manufacture oil that cannot reach the market.
The dangerous scenario is therefore not simply another battle in Yemen. It is escalation that simultaneously damages Saudi production or export infrastructure, seriously restricts Bab el-Mandeb, and again reduces traffic through Hormuz. Recent attacks already demonstrate that this is no longer an academic possibility. Tankers have been attacked around Hormuz, Houthi forces have struck Saudi energy infrastructure, and the cost of moving crude through the region has risen dramatically.
There is another vulnerability that receives less attention. Most of the world's spare oil-production capacity is itself located in the Gulf, particularly Saudi Arabia. Ordinarily, if several million barrels disappear elsewhere, Saudi spare capacity is the insurance policy. But if the crisis preventing oil reaching the market is centred on the Persian Gulf itself, much of the world's insurance policy is sitting behind the same chokepoint. That is the nightmare built into Hormuz.
Oil at US $100-plus is already a tax on the world economy. Transport becomes more expensive. Diesel feeds into trucking, agriculture and construction. Petrochemical costs spread through manufacturing. Aviation suffers. Inflation becomes harder for central banks to suppress because monetary policy cannot produce another barrel of crude oil.
Australia is certainly not insulated merely because it produces energy of its own. Petroleum is traded internationally, and Australian motorists ultimately face prices influenced by international crude and refined-product markets. Asia is particularly exposed because about 80 percent of the oil normally moving through Hormuz heads east. China, India, Japan and South Korea are therefore watching the same narrow stretch of water very closely.
And then there is gas. Qatar is one of the world's great LNG exporters, and almost all of its LNG normally travels through Hormuz. A serious closure therefore does not merely create an oil crisis. It creates a gas crisis as well, with consequences for electricity generation, industrial users and LNG prices across Asia and Europe.
The new Yemen offensive adds another mechanism by which the war can escape whatever boundaries remain around it. If the Saudi-backed forces succeed rapidly, Iran must decide how much support it is prepared to provide to a threatened ally. If the offensive bogs down, Saudi Arabia faces another grinding Yemen war. If Houthi retaliation concentrates upon Saudi oil installations, the energy market becomes directly involved. If the United States eventually enters the operation militarily, another line connecting Yemen to the wider US-Iran confrontation becomes shorter.
None of those outcomes is certain. Snyder's apocalyptic interpretation should not be confused with established fact, and the announcement of 100,000 potentially available troops does not mean that 100,000 men are already advancing successfully towards Sanaa. Previous campaigns against the Houthis provide ample reason for caution about predictions of a quick victory.
But the strategic geography is not speculation. The world's industrial economy still depends upon enormous quantities of petroleum moving every day through a handful of narrow passages. Two of the most politically dangerous of those passages, Hormuz and Bab el-Mandeb, are now entangled in the same regional war.
For the moment the oil continues to move, emergency stocks exist, alternative routes are being exploited and the market is coping. That is why Brent is around US $100 rather than at some catastrophic level.
The danger is what happens when several of those safety valves fail together. A missile striking somewhere in Yemen is one thing. A missile shutting an oil terminal is another. A tanker burning in Hormuz matters more still. Close enough routes at the same time and the Middle East war ceases to be something watched on television from the other side of the world. It arrives at every petrol pump. Including Aussie one.
https://michaeltsnyder.substack.com/p/it-has-begun-they-have-launched-a