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Two Chokepoints, One Crisis: Why Oil's $100 Return Is a Warning, Not a Spike

North Watch · ·6 min read
A cargo ship navigating through rough ocean waves on a bright day, illustrating the maritime oil shipping routes now disrupted by dual chokepoint closures in the Strait of Hormuz and Bab al-Mandeb.
Photo by RANJITH AR on PexelsPhoto by Taylor Hunt on PexelsPhoto by Ran Hua on Pexels

A tanker struck a naval mine in the Strait of Hormuz on July 26 after deviating from Iran’s designated shipping route, according to Iran’s semi-official Tasnim news agency[1]. The explosion came on the same day that US and Iranian forces observed a second consecutive night without airstrikes — a pause that diplomats are racing to convert into a durable ceasefire[2]. But the mine strike underscores how fragile that pause is: while bombers may have gone quiet, the waterways have not.

The problem facing markets is no longer a single chokepoint. It is two simultaneously.

The Bab al-Mandeb Shutdown

Yemen’s Iran-aligned Houthis declared a maritime embargo on Saudi Arabia on July 20, effectively closing the Bab al-Mandeb Strait to Saudi-linked shipping[3]. The strait, through which roughly 15% of global seaborne trade passes, had become a critical reroute for Saudi crude after the Strait of Hormuz disruption forced exports away from the Persian Gulf[2].

At least seven oil tankers made U-turns in the Red Sea within days of the announcement, ship-tracking data showed[3]. Saudi Arabia has since ceased loading crude for export through Bab al-Mandeb from its western port of Yanbu, rerouting shipments through the Suez Canal and around Africa[3]. Houthi missile strikes hit the Saudi Aramco refinery at Jizan on July 25, with five thermal anomalies detected across the complex[4].

The practical effect: Saudi oil loadings through the Red Sea route have dropped by an estimated 36%, and exports through Bab al-Mandeb have been driven “to near zero”[3].

Hormuz: The Mine and the Message

While Bab al-Mandeb captures the newer front, the Strait of Hormuz remains the larger problem. Through it normally flows 20% of the world’s oil[2]. Iran has controlled vessel transit since the war began on February 28, demanding ships use a route near its coastline and reserving the right to charge fees. The US military is enforcing a naval blockade of Iranian ports and has disabled at least two commercial ships attempting to breach it[2].

The July 26 tanker explosion — reported by Tasnim, Mehr, and Iran International — occurred after the vessel left the Iran-designated navigation corridor[1]. Whether the mine was deliberately placed to punish non-compliance or was a legacy munition, the signal to shipping companies is the same: deviating from Iran’s prescribed route carries physical risk. That is a form of coercive control over a critical waterway that does not require a formal blockade declaration.

What the Oil Market Is Pricing

Brent crude returned to $100 per barrel on July 26 after a brief retreat during the June ceasefire[5]. Prices had spiked to $102 mid-week before pulling back to roughly $96–97 on Friday amid reports of revived US-Iran talks and China-led peace initiatives[6]. WTI closed Friday at $90.42, down 1.92% on the day[6]. The oil ETF USO closed at $136.69, down 2% that session[7].

The ICIS analysis estimates that 25% of global oil output is now impacted by war — counting disruptions to Iranian exports, Saudi Red Sea routes, and Russian refining capacity hit by Ukrainian drone strikes[5]. Russian refinery runs have tumbled to 3.8 million barrels per day, a 21-year low, versus 6.8 million in nameplate capacity[5].

Insurance markets are transmitting the stress. War-risk premiums for VLCCs (very large crude carriers) have jumped from 1–3% of hull value earlier in July to 7.5–10%, according to S&P Global[5]. For a single VLCC carrying 2 million barrels at $100 per barrel, insurance alone now costs roughly $20 million per voyage[5]. Sinokor Group, the world’s largest supertanker owner, has offered seafarers six months’ extra salary to crew voyages through the conflict zone[5].

The Equity Tell

All three major US indexes finished the week of July 21 lower for a second consecutive week[6]. The S&P 500 closed Friday at 7,411.98 (+0.05%), the Dow at 51,947.25 (+0.46%), and the Nasdaq at 24,975.82 (−0.64%)[6]. Energy stocks were mixed: ExxonMobil (XOM) closed at $156.94, Chevron (CVX) at $194.79, and ConocoPhillips (COP) at $120.26 as of the July 24 close[7].

Defense stocks tell a more complicated story. Despite the war, defense-tech investors have faced what Fortune called a “bloodbath” — trading volumes surged as much as 140% above average in the conflict’s opening days, but gains failed to hold[8]. The Senate’s block of a war-powers resolution means US military engagement will continue, but the market is pricing in political constraints on a war that polls show is unpopular with American voters[8].

The Senate Russia Sanctions Bill

A separate but related pressure point advanced on Capitol Hill. A bipartisan group of senators introduced legislation on July 23 with 60+ cosponsors to impose tougher secondary sanctions on Russian oil, honoring the late Senator Lindsey Graham’s agreement with the Trump administration[9]. The bill targets countries that continue to support Moscow’s war economy[9]. If passed, it would tighten a different segment of the global oil supply picture — Russian crude — even as Hormuz and Bab al-Mandeb remain disrupted.

The Treasury’s OFAC simultaneously issued new Iran-related designations and amended Russia-related general licenses on July 24[9], layering financial sanctions onto a supply picture already strained by physical disruption.

What to Watch Next

  • Netanyahu’s Washington visit. Israeli PM Benjamin Netanyahu is expected to meet Trump next week[2]. Israel has been absent from the renewed US strikes, and analysts see its potential re-entry as both a bargaining chip and an escalation risk[2]. If Israel joins the bombing campaign, the conflict’s scope widens dramatically.

  • The Oman talks. Iran and Oman held several rounds of technical talks in Tehran over the weekend about Hormuz transit rules[2]. The Omani delegation departed Saturday, but talks reportedly continue. A framework for shared transit management could de-escalate the chokepoint, but Iran’s fractured leadership makes any deal fragile.

  • The Houthi front. Saudi Arabia is rerouting through the Suez Canal, but that adds 10–14 days and significant cost to voyages[3]. If Houthi strikes extend to Suez-adjacent waters or Saudi pipeline infrastructure, the reroute option narrows.

  • The Russia sanctions vote. The Senate bill has 60+ cosponsors but faces procedural hurdles[9]. A vote before the August recess would compound the supply squeeze by constraining Russian oil buyers.

  • US refining margins. US refining margins hit a record above $70 per barrel[8], lifting refiner shares. If crude stays at $100 while product cracks remain elevated, the margin signal tells you the market expects the disruption to persist — not resolve quickly.

The quiet indicator to monitor is the insurance market. When war-risk premiums on VLCCs move from 1% to 10% of hull value in a month, that is the market assigning a probability to continued disruption — and that probability is rising. The two-chokepoint problem means there is no easy bypass. Rerouting around Africa from the Red Sea and around the Cape from the Persian Gulf both add weeks and cost. The supply chain cannot quickly refill. That is why this is a warning, not a temporary spike.

This article is research commentary under FN2’s standing “not financial advice” disclaimer. No trades are placed and no account is managed here.

Sources

  1. Oil Tanker Explodes in Strait of Hormuz After Leaving Designated Route - Politics news -…tasnimnews.ir
  2. A pause in US-Iran fighting and a push for talks but uncertainty remains | AP Newsapnews.com
  3. Saudi Arabia shifts to Suez as Houthis drive Bab Al Mandeb oil exports to near zero | The…thenationalnews.com
  4. Saudi Arabia shifts to Suez as Houthis drive Bab Al Mandeb oil exports to near zero | The…thenationalnews.com
  5. Brent returns to $100/bbl, with 25% of global oil output now impacted by war – Chemicals…icis.com
  6. How major US stock indexes fared Friday 7/24/2026 | AP Newsapnews.com
  7. Quote: XOMFN2 market data
  8. Defense tech investors thought the war in Iran could make them millions. Instead, they've…fortune.com
  9. Russia sanctions bill faces hurdles in Senate despite renewed push after Graham’s death |…cnn.com