Dual Chokepoint: Houthi Strikes Close Saudi Oil Bypass as Brent Reclaims $100

Brent crude briefly punched through $100 a barrel this week before easing — not on an OPEC cut, but because the world’s two most critical oil chokepoints are now simultaneously under threat. Houthi missiles have struck Saudi Aramco facilities in Jizan and Yanbu. The Strait of Hormuz has “effectively ceased” as a transit route for crude. And on top of that, Washington has fired a new tariff barrage at 60 nations covering 99.4% of US imports, while the EU’s latest Russia sanctions package arrived so watered down that the central provision — a ban on shipping Russian LNG to third countries — was gutted by a single Greek exemption.

This is not a risk-off week. It is a convergence week, and the market has not yet fully priced what happens if the two-chokepoint squeeze persists.

The two-chokepoint problem

For months, the market treated Yanbu — Saudi Arabia’s Red Sea export terminal on the west coast — as the answer to Hormuz risk. Saudi Aramco rerouted crude through its East-West Petroline to Yanbu, and by June, 98.6% of Saudi liftings flowed through that terminal. But Yanbu’s exit route is the Bab al-Mandeb Strait, and the Houthis declared a naval blockade of Saudi ports on July 21.^[1]

As Wood Mackenzie analyst Ian Solis put it: “What looked like diversification was in reality a shift from one strategic bottleneck to another.”^[2]

Fresh tracking data from Wood Mackenzie shows Gulf crude exports collapsed 82% between January and June — from 18.8 million barrels per day across 370 cargoes to just 3.4 million b/d across 71 cargoes. Iraq, which exported 3.77 million b/d in January, recorded zero exports by June. Kuwait and Qatar followed the same path from April, having no pipeline bypass.^[2]

Even the Yanbu workaround is losing steam: volumes there are down 41% from their March peak.^[2] And on Sunday, Houthi forces fired missiles and drones at Aramco facilities in the coastal cities of Jizan and Yanbu — the very infrastructure Saudi Arabia relies on as its Hormuz bypass. A large column of smoke was seen rising over Jizan. Two ballistic missiles aimed at Yanbu installations were intercepted by a Greek-operated Patriot battery.^[1]

The insurance market has absorbed the risk with brutal speed. War-risk premiums for VLCCs (very large crude carriers) jumped from 1–3% of hull value earlier this month to 7.5–10% — translating to roughly $20 million in insurance costs alone for a single supertanker carrying 2 million barrels of crude at $100/bbl.^[3]

A fragile pause — not a ceasefire

The US military paused its airstrikes on Iran after 13 consecutive nights of bombing, the longest lull since the war began on February 28.^[4] Diplomatic channels are active: Iran and Oman held several rounds of technical talks over the weekend about the strait’s governance, and mediators say a compromise is being negotiated around Iran running vessel transit through Hormuz with fewer restrictions.^[4]

But the pause is operational, not resolved. President Trump told reporters Friday there are “two ways” forward: “You can just keep doing exactly what we’re doing and take them apart piece by piece. We could do it in a more rapid fashion, which we might do. Or we can negotiate with them, which we’re also doing right now.”^[4]

The AP reported that the U.S. military disabled a Mozambique-flagged vessel in the Gulf of Oman on Friday after it tried to breach the American naval blockade of Iranian ports — the second commercial ship disabled since the blockade was reimposed.^[4]

Israeli Prime Minister Netanyahu is scheduled to visit Washington next week, a wild card that could either reinforce the diplomatic track or signal escalation. As Michael Singh of the Washington Institute noted: “The Iranians understand that perhaps it could get worse because Israel could come into the conflict.” But he also cautioned that Israel’s absence from the renewed strikes “may signal to the Iranians that we’re looking to limit the conflict.”^[4]

A 15 July briefing from Oxford Economics finds that betting markets already assign a 72% probability to Iran introducing Hormuz transit fees by year-end — a $1-per-barrel levy that could raise an estimated $6.8 billion annually.^[2]

The tariff wave: 60 nations, 99.4% of imports

While the Middle East dominates the headlines, the trade front is equally consequential. On Thursday, July 23, the USTR finalized new double-digit tariffs of 10% to 12.5% on goods from 60 trading partners — covering 99.4% of all US imports — under Section 301 of the Trade Act of 1974.^[5]

The tariffs went into effect Friday morning, timed to the lapse of a 10% near-blanket duty that the Supreme Court had deemed unlawful.^[5] Administration officials emphasized that these Section 301 tariffs are more legally durable than the emergency authority used for the original “Liberation Day” duties, having survived previous court challenges and remaining indefinitely.^[5]

The response from trading partners was swift. The EU’s foreign policy chief Kaja Kallas called the forced-labor justification “a negative surprise” and rejected the claims as unfounded. Brazil rejected its 12.5% rate and reiterated calls for reciprocity. Australia’s trade minister called the move “completely unjustified.”^[5] Oil and gas imports received exemptions, as did products that cannot be sourced domestically.^[5]

The White House also announced a 50% tariff on certain Canadian goods to take effect next month under a never-before-used provision of the Smoot-Hawley Trade Act — a provision whose last major invocation preceded the 1930s trade collapse.^[5]

The Russia sanctions that weren’t

On the same day the USTR finalized its 60-nation tariff package, EU ambassadors approved the bloc’s 21st sanctions package against Russia — but only after months of delay and significant dilution.^[6] The central provision, a ban on EU operators shipping Russian LNG to third countries, was carved out with an exemption for contracts signed before Russia’s February 2022 invasion, after Greece pushed to protect its shipping industry’s role in Russian gas exports.^[6]

Euractiv reported that the package also faced objections from multiple member states beyond Greece, resulting in a “significantly weakened” set of measures.^[6] The unanimity requirement — the same structural constraint that has haunted every previous round — again produced a result that sanctions advocates described as more gesture than bite.

Meanwhile, Ukraine’s long-range strikes on Russian energy infrastructure continue to tighten the supply picture from the other direction. Russian refinery runs have tumbled to 3.8 million b/d, a 21-year low versus 6.8 million b/d nameplate capacity.^[3] Ukrainian drones struck the Omsk refinery, 2,500 km from the Ukrainian border.^[3] In the Caspian Sea, a long-range strike on an Iranian vessel killed one sailor — an attack Iran blamed on Ukraine, entangling the US-Iran and Russia-Ukraine wars in a new and unexpected theater.^[1]

What the market is doing

The S&P 500 posted its second straight weekly loss, with the Dow Jones Industrial Average losing 506 points on Thursday before recovering 235 points on Friday.^[7] Oil prices slipped on Friday — the first daily decline in a week — with USO closing down 2% on the week at $136.69 as of the July 24 close.^[8] Energy equities were relatively muted: XOM closed at $156.94, CVX at $194.79, and COP at $120.26 on July 24, all roughly flat.^[8]

A semiconductor gauge dropped 4.3% on Friday, dragging the Nasdaq down, while strong earnings from select names kept the broader index near flat.^[7] Defense stocks have been a notable laggard — Fortune reported that despite the US spending $37.5 billion on Operation Epic Fury against Iran, defense-tech investors faced a “Wall Street bloodbath” rather than a windfall.^[7]

The 10-year Treasury yield climbed back to 4.7% as oil’s renewed surge fed through to rate expectations.^[3]

What to watch next

1. Whether the airstrike pause extends beyond two nights. The Washington Institute’s Singh flagged that a multiday pause would be “something significant” — distinguishing an operational lull from a genuine de-escalation signal.^[4]

2. Netanyahu’s Washington visit next week. Israel’s potential re-entry into the conflict is the single largest tail risk for escalation.^[4]

3. OPEC+ meeting on August 2. The group is expected to vote on a sixth consecutive output hike of 188,000 b/d for September targets — but with Hormuz exports blocked, paper quotas remain disconnected from actual supply.^[9]

4. Iran-Oman technical talks on Hormuz governance. The compromise under negotiation centers on Iran running vessel transit with fewer restrictions. If it holds, it could reopen the strait — but the 72% market-implied probability of permanent transit fees suggests the market expects some lasting toll.^[2]

5. Pending Section 301 investigations on manufacturing overcapacity targeting China, Mexico, and the EU. These are separate from the forced-labor investigation that produced this week’s tariffs and could layer on another set of duties in the coming months.^[5]

6. The 50% Canadian tariff under Smoot-Hawley. If implemented next month, it would invoke a trade law mechanism with direct historical echoes of the 1930s tariff spiral.^[5]

The structural risk is that the two-chokepoint squeeze has no quick fix. The diplomatic logic that has “always found its way back to the negotiating table” is still active — but the physical damage to supply routes, the insurance market’s repricing, and the entanglement of the Iran, Yemen, Russia-Ukraine, and trade fronts mean that even a successful negotiation would leave a lasting imprint on energy costs, shipping rates, and bond yields. The market’s Friday dip in oil looks less like a peak and more like a breath between waves.