Houthi Red Sea Attacks Threaten India's Oil Imports Amidst Iran Tensions
Houthi attacks in the Red Sea escalate concerns for India's crude oil imports.
Top Summary
- What happened: Yemen's Houthi rebels launched attacks on Israeli military sites, potentially disrupting shipping through the Bab al-Mandab Strait.
- Why it matters: This escalation could lead to a chokehold on regional seaborne oil trade, impacting global oil and commodity prices.
- What changes for people: Increased freight rates and potential supply chain disruptions could lead to higher prices for oil, food, and manufactured goods in India.
- Who is affected: India's middle class and poor sections are most vulnerable to inflationary pressures caused by these disruptions.
Houthi Attacks and Red Sea Shipping
Yemen's Houthi rebels have entered the conflict, firing missiles at Israeli military sites. This action raises concerns about potential disruptions to shipping through the Bab al-Mandab Strait.
The Houthis control parts of Yemen's western coastline, including the port city of Hodeidah. This strategic location allows them to threaten vessels passing through the strait connecting the Red Sea and the Indian Ocean.
While there is no official Houthi blockade yet, the risk of one is increasing. Experts warn this marks a "serious and deeply concerning escalation".
The Bab al-Mandab Strait: A Critical Chokepoint
The Bab al-Mandab Strait is a vital waterway for global trade. Before recent disruptions, it saw 8.7 to 9.3 million barrels of crude oil pass through daily.
However, Houthi strikes have significantly impacted shipping. By mid-December 2023, tonnage transiting the strait had dropped by over 50 per cent, forcing some firms to reroute via the Cape of Good Hope.
Analysts from S&P Global reported this drastic decrease. Shipping has remained impacted throughout 2024 and 2025.
The Iran Connection and Potential Blockade
The Houthi actions align with potential Iranian strategies. An unnamed Iranian official suggested that attacks on Iranian islands could prompt Tehran to retaliate by closing the Bab al-Mandab Strait.
This raises the possibility of Iran controlling both the Strait of Hormuz and the Bab al-Mandab Strait. Such a scenario would give Iran a significant chokehold on regional seaborne oil trade.
As ex-US diplomat Nabeel Khoury told Al Jazeera, "All they have to do is fire at a couple of ships... and that would lead to the arrest of all commercial shipping through the Red Sea."
Impact on India's Crude Oil Imports
While 40 to 50 per cent of India's crude imports bypass the Bab al-Mandab, the disruptions still pose a risk. These imports mainly come from Iraq, the UAE, and Saudi Arabia via the Strait of Hormuz.
Disruptions could lead to higher prices for gas (LNG) from Qatar and crude (via Yanbu), increasing India's crude basket prices and freight rates.
Furthermore, the strait also handles 15 to 20 per cent of global container traffic, including dry bulk cargo like machinery, food, and manufactured goods. Rerouting increases costs and logistics, potentially causing supply chain disruptions and adding to inflationary pressure.
The Hormuz Solution No More?
Previously, pipelines from refineries on the eastern Arabian Peninsula to Yanbu in Saudi Arabia offered an alternative route to bypass the Strait of Hormuz. However, the Houthis entering the conflict complicates this 'escape' route.
This situation strengthens Iran's grip on maritime crude exports from the Gulf, potentially driving oil prices past US$200 per barrel.
Shipping around the African continent adds US$1-2 per barrel for crude oil freight costs. Charter rates for VLCCs contracted by Asian refineries roughly double to US$100,000 daily.
What to Watch Next
Monitor the progress of ongoing peace talks, particularly if Tel Aviv retaliates, which could further complicate the situation. Also, observe whether Houthi actions escalate into a full blockade of the Bab al-Mandab Strait, and how international actors respond.