Everyone is watching the Strait of Hormuz. They should also be watching Bab el-Mandeb.
For nearly six months, much of the oil market’s geopolitical risk premium has revolved around a single question: does Hormuz reopen? That framing made sense when Hormuz was the only chokepoint in play. It no longer is.
Saudi Arabia’s own hedge against a closed Hormuz is itself under attack.
When Hormuz shut, Saudi Arabia’s principal alternative was its Red Sea export route. The Houthis have spent the past month systematically threatening that route instead. They imposed a maritime blockade on Saudi Arabia in July. They have struck two tankers in the Red Sea, hit Aramco’s Jazan and Yanbu facilities, and a fire at Jazan has delayed the plant’s restart into late August. Saudi tankers are now diverting a second time, this time toward Egypt’s Sidi Kerir terminal on the Mediterranean, with at least eight very large crude carriers signalling that route by late July. A former Yemeni diplomat warned this month that a new large-scale war may be unavoidable.
This is the argument that matters. The market has spent six months pricing the risk that Hormuz stays shut. It has barely begun pricing the risk that Saudi Arabia’s escape route from that closure gets shut too.
The UAE’s own behaviour suggests the region no longer believes a Hormuz reopening solves this.
ADNOC has spent $1.3 billion nearly doubling its tanker fleet as export demand surged. At the same time, it has kept crude moving through Hormuz using dark, ship-to-ship transfers, with twelve observed by satellite on a single day this month. Fifteen ADNOC vessels have been attacked since the war began. And rather than simply waiting out the conflict, ADNOC is now exploring a new LNG export terminal on the UAE’s east coast, entirely outside Hormuz. The UAE’s strategic direction is clear: reduce dependency on Hormuz toward zero. When the country most operationally committed to keeping Hormuz open is simultaneously building permanent infrastructure to avoid it, that tells you something about how durable anyone actually expects a deal to be.
Layer onto this a constraint that has nothing to do with diplomacy: the West’s capacity to defend any of this infrastructure is not unlimited.
Bloomberg Economics reported this month that US air defence interceptors are critically low, that more than half of the most advanced munitions available at the war’s start have already been fired. The Pentagon has requested $67 billion in emergency funding, including $18.2 billion to replenish missile interceptors. An empty interceptor magazine does not care which chokepoint gets attacked next. If Gulf infrastructure, Hormuz or the Red Sea comes under sustained pressure while the ability to defend it is stretched, the constraint is no longer diplomatic. It is physical.
Put these three pieces together and the conclusion is uncomfortable: a signed Hormuz agreement would not actually retire the oil risk premium.
Even Iran’s own state media has said as much, that any Iran-Oman shipping arrangement would not mean the strait reopens in practice. But the deeper point is broader than Iran’s intentions. Even a genuine, durable Hormuz resolution leaves the Red Sea exposed, leaves the UAE’s improvised bypass exposed, and leaves the whole system dependent on a Western defence umbrella that is, by its own accounting, running thin. The market has been trading a single binary, deal or no deal, when the actual risk structure has at least two independent points of failure.
For South Africa, this is not distant geopolitics. It is an inflation trade.
The link runs in a straight line: oil to fuel prices to headline CPI to breakevens to the SARB’s reaction function to bonds and the rand. My previous argument was that South Africa’s inflation overshoot may be narrower than it looks, because the shock is concentrated in oil rather than something structural. That thesis still holds. But it comes with a condition: the case for a narrower inflation problem depends on the oil shock being temporary. A market pricing one chokepoint when there are genuinely two is a market that may be underestimating how long, and how large, that shock could still run.
None of this means the tail risk is the base case. Brent sitting near $90, not $100, reflects a market still betting the system holds. But holding is not the same as resolved, and a single Hormuz headline was never going to be the whole story.
The market is pricing one chokepoint. The real risk is that there are now two.
