Twin Chokepoints: Why Hormuz's Collapse and a Red Sea Threat Are Repricing Oil Overnight

The Ceasefire That Couldn’t Hold

Less than a month after the United States and Iran signed a memorandum of understanding on June 17 to halt hostilities, the agreement has collapsed. Seven consecutive nights of U.S. airstrikes against Iranian military and infrastructure targets, paired with Iranian missile and drone attacks on commercial shipping and U.S. bases across the Gulf, have erased every pillar of the deal.{{cite:5d2c95d6232e}}

The pattern is now clear: each tit-for-tat exchange has crossed another red line. An Iranian drone struck a cargo ship in the Strait of Hormuz on June 25. The U.S. responded with strikes on missile and drone locations. Iran then attacked a tanker using an alternative route along Oman’s coast, and the U.S. escalated again. Iran broadened its retaliation to hit Kuwait and Bahrain, both hosting American troops.{{cite:5d2c95d6232e}}

On Friday, Iran’s Deputy Foreign Minister Kazem Gharibabadi announced the country was suspending its commitments under the memorandum of understanding. Supreme Leader Ayatollah Mojtaba Khamenei warned that Iran has “unforgettable lessons in store” for the United States.{{cite:a963a911cda6}} The U.S. military confirmed that two American service members were killed and one is missing after Iran attacked a base in Jordan on Friday.{{cite:a963a911cda6}}

Hormuz at a Standstill

The market tell is in the shipping data. Strait of Hormuz transits fell to just eight vessels on Thursday, July 17, down from 15 the day prior, according to the trade intelligence firm Kpler. Before the U.S.-Israeli attack on Iran on February 28, more than 100 ships transited the strait daily. On Thursday, only three cargo ships crossed — the lowest daily count since May — and for a second consecutive day, no very large crude carriers (VLCCs) or liquefied natural gas (LNG) tankers passed through at all.{{cite:53cbc1c25aef}}

The maritime security picture has deteriorated to what one industry leader calls a worst case. Dimitris Maniatis, CEO of maritime risk service Marisks, told a Lloyd’s List Intelligence briefing that shippers face a “worst-case scenario” in the strait. At least nine ships have come under attack since July 6 as Iran tries to force vessels to navigate Hormuz through its territorial waters rather than a U.S.-protected route along Oman’s coast.{{cite:272da0a8cef1}}

“We see the reduction of the volume of transits through the Strait of Hormuz and right now crews of vessels are even more concerned than they were before,” Maniatis said. “Nobody is willing to move.”{{cite:272da0a8cef1}}

The traditional route through the middle of Hormuz — the traffic separation scheme — remains too dangerous for ships due to the threat of mines. “If a mine detonates, typically that happens under the ship,” said Jakob Larsen, chief security officer at BIMCO, one of the world’s largest shipping associations. “The mine is a very powerful weapon, so it’s extremely dangerous for ships to run into a minefield.”{{cite:272da0a8cef1}} The IRGC has claimed that two oil tankers exploded and caught fire after entering a mined route south of the strait.{{cite:3da18cbc0b2f}}

Oil Reprices — Sharply

The oil market is absorbing this in real time. Brent crude settled at $88.10 per barrel on Friday, up $3.87 or 4.59% on the day, while U.S. West Texas Intermediate (WTI) rose $3.54, or 4.48%, to $82.49. Both benchmarks posted approximately 16% gains for the week — Brent’s third consecutive weekly rise and WTI’s second.{{cite:53cbc1c25aef}}

Energy stocks were the only major sector of the U.S. stock market to close higher on Friday, while equities broadly fell — the S&P 500 dropped 1.01% to 7,457.69 and the Nasdaq Composite slid 1.4% to 25,520.24, weighed down by a semiconductor selloff.{{cite:359984e30f96}} The divergent signal is itself a data point: a market pricing an oil supply shock alongside a tech-led risk-off rotation.

The IEA reported that Gulf region oil exports stood at 16.1 million barrels per day in June, up 6.5 million barrels daily but still far below the pre-conflict level of 24 million barrels per day. Production shut-ins averaged 8.3 million barrels a day in June, after peaking at 11.2 million in May.{{cite:53cbc1c25aef}} Those partial-recovery figures preceded the current escalation.

The Second Chokepoint: Red Sea at Risk

The most dangerous signal this week is not in Hormuz itself. It is the quiet indicator that Iran is preparing to open a second front.

Three sources told Reuters on July 16 that Iran has instructed Yemen’s Houthis to close the Bab el-Mandeb Strait — the gateway to the Red Sea — if the United States strikes Iran’s power grid.{{cite:eeb6f323328b}} This matters enormously because the Red Sea has become a vital alternative route for Saudi oil exports during the war, with crude shipments from Saudi Arabia’s Yanbu port on the Red Sea coast approaching maximum levels as Gulf nations invest in pipeline workarounds to bypass Hormuz.{{cite:eeb6f323328b}}

Iran has explicitly threatened to shut additional energy export routes beyond Hormuz, including the Bab el-Mandeb gateway.{{cite:eeb6f323328b}} If both chokepoints close simultaneously — Hormuz at the entrance of the Gulf and Bab el-Mandeb at the exit of the Red Sea — the world would face a near-total maritime blockade of Middle East crude exports, affecting roughly a fifth of globally traded oil and gas.

The Houthi dimension adds operational risk the market has not fully digested. Houthi leader Abdulmalik al-Houthi delivered a speech on July 16, and Iran’s reported instruction to close the Red Sea gateway came on the same day the U.S. struck bridges and power stations in southern Iran, severing roads to the Hormuz coast.{{cite:eeb6f323328b}} The linkage between U.S. strikes on Iranian power infrastructure and a Houthi response against Red Sea shipping is a specific escalation trigger that market participants should be monitoring closely.

The Toll-and-Blockade Policy Whiplash

Adding a layer of policy uncertainty, President Trump announced on July 13 that the U.S. would “take over” the Strait of Hormuz and charge a 20% “reimbursement” fee on all cargo transiting the waterway. Industry experts calculated that the fee could cost the largest vessels over $30 million per shipment.{{cite:43c2e2cb3229}}

Trump walked back the proposal the following day, replacing it with trade and investment deals with Gulf states.{{cite:43c2e2cb3229}} But the episode underscored the volatility of U.S. policy posture: the administration simultaneously reinstated a naval blockade on Iranian ports, revoked a waiver that had allowed Iran to sell oil for U.S. dollars, and launched a seventh straight night of strikes that destroyed bridges, tunnels, and rail links across southern Iran, severing roads to the Hormuz coast.{{cite:2fcade9110fa}}

Separately, a bipartisan group of U.S. senators has unveiled a sanctions bill that could impose tariffs of up to 100% on exports from countries continuing to purchase Russian oil, including India.{{cite:2fcade9110fa}} While not directly linked to the Iran conflict, the bill adds another layer of supply-chain risk to an already strained oil market.

What to Watch Next

1. Bab el-Mandeb closure signaling. If Houthi forces begin attacks on vessels in the Red Sea or formally declare a blockade, oil’s risk premium would likely expand materially. Saudi Arabia’s Yanbu port exports — the current workaround for Hormuz disruption — would be directly threatened.{{cite:eeb6f323328b}}

2. Ground assault indicators. U.S. strikes on bridges, tunnels, and rail links in southern Iran’s Hormozgan province are feeding speculation in both Washington and Tehran that a ground assault on the strait’s Iranian-held islands may follow.{{cite:2fcade9110fa}} Any deployment of large ground forces would signal a shift from a punitive campaign to a territorial objective.

3. Tanker traffic as a real-time indicator. The Kpler daily transit count is the fastest available proxy for whether the strait is functionally open. A continued decline toward zero — or sustained days with no VLCC or LNG transits — would confirm that commercial shipping has effectively given up on the route regardless of political declarations.{{cite:53cbc1c25aef}}

4. SPR and inventory levels. The U.S. Strategic Petroleum Reserve hit a 43-year low{{cite:863548676363}}, and global oil inventories saw their first monthly increase in four months in June{{cite:53cbc1c25aef}}. The buffer is thin.

5. Equity-bond-oil divergence. If energy stocks continue to diverge positively from a broader equity selloff, the market is pricing a sustained supply shock rather than a transient fear spike. The opposite — oil rolling over while defense and shipping names stay bid — would signal that geopolitical risk is being treated as a persistent overhang even as energy supply fears ease.

FN2 Research provides financial research and education, not personalized investment advice. This article synthesizes publicly reported news and data points as of July 18, 2026.