Houthi Attacks Challenge Predictions on Strait of Hormuz
Treasury Secretary Scott Bessent suggested earlier this month that the Strait of Hormuz could become irrelevant to the oil trade within two years, as overland pipelines would provide alternatives to the Persian Gulf. However, recent Houthi attacks on Saudi Arabia’s East-West pipeline may be casting doubt on that prediction.
Bessent first mentioned this idea back in August and reiterated it during the G20 finance ministers’ meeting in Asheville, North Carolina. He indicated that in just two years, the Strait of Hormuz could be “a worthless piece of water,” explaining that oil would be transported through land pipelines, thereby reducing Iran’s significance in the trade.
Yet, the recent drone strikes by the Houthis on the Saudi pipeline are raising questions about the feasibility of a future where the Strait of Hormuz is entirely disregarded.
The Houthis launched an offensive lasting 36 hours, taking control of about 2,000 square kilometers of land, including important coastal regions along the Bab el-Mandeb Strait, a crucial trade route for oil.
Additionally, they reportedly attacked the Yanbu Aramco Sinopec Refining Company, a significant facility on Saudi Arabia’s Red Sea coast. There are indications that oil loadings at the Red Sea export terminal in Yanbu have significantly slowed, as suggested by a Reuters report.
The East-West pipeline plays a vital role for Saudi Aramco, providing the main land-based alternative to the congested Strait of Hormuz; it transports crude oil from Gulf ports across the Arabian Peninsula to the port city of Yanbu on the Red Sea.
Kathleen Tyson, a markets expert and former Federal Reserve banker, did not hold back in critiquing Bessent’s forecast. She shared her thoughts on social media, sarcastically noting, “Just another great call from US Treasury Secretary Bessent,” and pointed out the impact of the Houthi attacks on the Yanbu oil loading port and pipeline infrastructure.
The Houthi strikes have already triggered a spike in global oil prices, with Brent crude rising over 3 percent to exceed $107-$108 per barrel following the disruption. Notably, throughout September, oil prices have surged by about 20 percent.
