Dual Chokepoint Crisis: Brent Tops $95 as Houthis Open New Front at Bab al-Mandeb

Two of the world’s most critical oil transit chokepoints are under simultaneous pressure for the first time in this conflict, and the market tell is sharpening. Brent crude briefly crossed $95 a barrel on July 22 — the highest since early June — as the US-Iran war entered its 11th consecutive day of strikes and Yemen’s Houthis declared a naval blockade of the Bab al-Mandeb strait.^[1] US equity-index futures slipped into the open, with investors cautious ahead of Alphabet’s earnings after the bell, even as oil’s rally tempers AI-driven optimism.^[2]

This is not a single-shock story. It is a compounding one: an existing chokepoint (Hormuz) already operating at roughly 15% of pre-war capacity, now joined by a threatened second chokepoint (Bab al-Mandeb) that, if enforced, would close the Saudis’ main workaround for getting crude to market.

Hormuz: Traffic has collapsed

Vessel transits through the Strait of Hormuz have cratered since the US blockade of Iranian ports took effect. Lloyd’s List Intelligence recorded just 53 vessel transits in the week through July 20 — a 66% drop from 157 the prior week. Tanker and gas carrier movements, the ships responsible for moving most Gulf crude and LNG, fell to 30 crossings from 90.^[3]

Kpler data show daily crossings averaged above 20 vessels before July 15, then fell to 16 that day before dropping to single digits on July 16. Traffic has stayed subdued since, with only sporadic recoveries.^[3] S&P Global recorded just 40 transits between July 17 and July 19 — roughly 13 per day — with weekly traffic down nearly 50% week-over-week. Iran-linked and sanctioned vessels continue to dominate the remaining movements, suggesting mainstream international shipowners remain reluctant to return.^[3]

“The latest escalation shows how expectations of a rapid opening of the Strait were premature,” said Saul Kavonic, head of energy research at MST Marquee. He warned that flows through Hormuz have dropped to around 15% of pre-war levels and that oil could retest $100 a barrel if the current fighting intensity persists for several weeks or if regional energy infrastructure comes under direct attack.^[3]

Bab al-Mandeb: The workaround now at risk

The Houthis’ blockade announcement on Tuesday targets the 14-mile-wide Bab al-Mandeb strait between Saudi Arabia and Djibouti — about 40% narrower than Hormuz. The threat alone has already forced five tankers to make U-turns in the Red Sea, including a vessel departing Saudi Arabia’s Yanbu port carrying crude bound for China.^[4]

The timing is what makes this more than a footnote. Saudi Arabia had been diverting roughly 4 to 5 million barrels of oil per day from the Persian Gulf through its East-West pipeline to the Red Sea port of Yanbu, effectively routing around the Hormuz disruption.^[4] About 6.2 million barrels of oil per day have been transiting Bab al-Mandeb over the past month, according to Kpler.^[4] If the Houthis make good on the blockade — or even if the threat persists — that workaround collapses.

“If that route becomes inoperable, then the oil supply disruption becomes more serious and we start talking again about a ‘no way out’ situation,” said Helima Croft, head of global strategy at RBC Capital Markets.^[4]

Dan Pickering, chief investment officer at Pickering Energy Partners, estimated that a full blockade of Bab al-Mandeb could add another $5 to $10 a barrel to prices — pushing Brent above $100.^[4] The Suez Canal route northward is the only alternative for ships unwilling to transit south through Bab al-Mandeb, but it deposits vessels in the Mediterranean rather than the Indian Ocean — a poor path for Saudi oil heading to its largest customers in Southeast Asia.^[4]

Currency fallout: The yen hits a 40-year low

The dollar’s safe-haven bid has accelerated in lockstep with oil. The Japanese yen fell to approximately 163 per dollar on July 22 — a level unseen since December 1986, nearly 40 years ago — as investors sought the US currency amid escalating Middle East tensions.^[5][6]

The yen’s weakness compounds the pressure: a weaker yen makes Japan’s oil imports — already the world’s fourth-largest — more expensive in local-currency terms, creating a feedback loop. The Bank of Japan is reportedly considering accelerating the pace of benchmark rate hikes as the currency’s slide deepens.^[6] Japan’s Finance Ministry has signaled readiness to take “decisive currency action.”^[6]

The dollar index rose 0.18% on the session as intensifying Middle East tensions drove crude prices higher.^[6]

A second front in trade: 50% tariffs on Canada

Layered on top of the geopolitical oil shock, the Trump administration signed three proclamations on July 20 imposing additional 50% tariffs on a wide range of Canadian goods under Section 338 of the Tariff Act of 1930, citing Canada’s “discriminatory treatment” of American commerce in autos, alcohol, and cheese.^[7] The tariffs are scheduled to take effect in one month.^[7]

Separately, the administration is preparing fresh tariffs targeting 60 trading partners as the temporary 10% global levy is set to expire this week, with US Trade Representative Jamieson Greer signaling new import taxes could land by Friday.^[8] Trump also outlined plans for zero tariffs on imported generic drugs for two years starting August 1, rising to 100% in 2028 and 200% in 2029 — a timeline with major implications for India, which ships roughly one-third of its pharma exports to the US.^[8]

The Canadian tariffs add a North American trade dimension to what is already a multi-front risk environment. The Globe and Mail reported that the move opens “a new front in trade negotiations” after Washington opted not to extend the USMCA on July 1.^[8] A source familiar with the US-Canada talks told iPolitics: “They 100 percent called our bluff. They know exactly what we’re doing.”^[8]

What equity futures and earnings tell us

US equity-index futures slipped ahead of the July 22 session, with S&P 500, Nasdaq, and Dow futures all easing as the oil rally tempers AI optimism ahead of a big tech earnings week.^[2] Alphabet reports after the close — the first Mag 7 company to report Q2 2026 — with consensus expecting roughly $116.5 billion in revenue and $2.87 EPS.^[9]

The tension in the market is clear: tech earnings could provide a fundamental catalyst, but the geopolitical risk premium is building a ceiling over sentiment. Brent above $92, a yen at 40-year lows, and two choked shipping lanes are not the backdrop for risk-on chasing.

What to watch next

• Houthi enforcement of the Bab al-Mandeb blockade. The threat has forced U-turns but has not been physically enforced. If the Houthis begin active interdiction, the “no way out” scenario for Saudi crude becomes real and $100+ Brent moves from tail risk to base case.

• Hormuz traffic trajectory. Current crossings are running at 15% of pre-war levels. Further deterioration — or any attack on regional energy infrastructure — would likely push oil toward triple digits.^[3]

• BOJ intervention. The yen at 163 per dollar with Japanese authorities signaling “decisive action” creates a potential circuit breaker. Actual intervention would ripple across carry trades and dollar funding markets.

• Canada tariff effective date (mid-August). The 50% Section 338 tariffs take effect in approximately one month.^[7] Canadian PM Mark Carney has vowed to “intensify” trade talks, but the negotiation timeline is compressed.^[7]

• Alphabet earnings and the AI-capex narrative. With consensus at $116.5B revenue, the report tests whether cloud and AI infrastructure spending can sustain tech valuations against a rising geopolitical risk premium.^[9]

• The 10% global tariff expiration and replacement package. Greer’s signal that new tariffs on 60 trading partners could land by Friday adds a policy-shock vector on top of the conflict-driven oil shock.^[8]

The pattern bears watching: two shipping chokepoints under simultaneous threat, a 40-year currency extreme, layered tariff escalation, and an earnings season that must justify elevated multiples against a rising risk premium. Each of these is manageable in isolation. The question for the market is whether they remain isolated.