The monthlong spate of attacks by Yemen’s Iranian-backed Houthi rebels on ships in the Red Sea has certainly spooked shipping companies, which have diverted vessels from the danger zone even as U.S. and British naval forces continue to hammer the Houthis with retaliatory strikes.
What the relentless and escalating attacks haven’t done—surprisingly, in a place that accounts for about 12 percent of the transit of the world’s seaborne supply of oil—is rattle energy markets at all. After more than a month of ongoing rocket and missile attacks on all sorts of commercial ships in the Red Sea (nominally part of a Houthi campaign to punish Israel for its invasion of the Gaza Strip), London’s Brent benchmark crude oil price is actually lower than it was in early December, at around $78 a barrel. The U.S. benchmark price has barely moved since late November and remains around $73 a barrel.
For decades, the sanctity and security of energy flows in the waters around the Middle East have been considered the geopolitical tripwire for energy markets. Much of the energy that powers the world, whether in the form of crude oil or natural gas, either comes from the region or passes through tight waterways such as the Bab el-Mandeb, the chokepoint just west of Yemen that is the gateway to the Red Sea and thus the Suez Canal, or the Strait of Hormuz, another energy-intensive bottleneck on the other side of Saudi Arabia. There was a time when Iran could spike global energy prices just by threatening to make mischief in the Strait of Hormuz, let alone when it or its Houthi allies actually struck key Saudi oil installations.
Yet now, amid a widening regional conflict with actual and repeated attacks on commercial shipping, oil markets are nonplussed.
“There is a shopping list of headlines that, 10 years ago, would have sent shock waves through the market, and they are becoming a daily norm, and prices are barely blinking,” said Richard Bronze, a co-founder and the head of geopolitics at Energy Aspects, a research consultancy based in London.
What explains the lack of response from energy markets? There are, it turns out, a lot of reasons. For starters, the Bab el-Mandeb that the Houthis are making impassable is not the same thing as the Strait of Hormuz: The former is a convenient pathway to Suez and on to Europe, but it has alternatives, while the latter is a vital source and conduit of oil in its own right.
But more fundamentally, oil market fundamentals explain a lot of the blasé response....
Also at Foreign Policy, January 17: "U.S. Redesignates Houthis as a Terrorist Organization"
Both Brent, up 1.48% and WTI, up 1.98% are trading higher today. About an hour ago the New York Times shared this bit o'bluster:
