Middle East Escalation and Risks in the Hormuz and Bab el-Mandeb Straits: A Direct Blow to Asian Energy Security

Executive Summary

Following U.S.-Israeli airstrikes on Iran in February 2026, Iran has retaliated by restricting passage through the Strait of Hormuz. After the Islamabad Memorandum expired in August, the Persian Gulf Strait Authority blacklisted 45 vessels, including a tanker owned by Sinokor Merchant Marine. In September, the capture of Mokha by Houthi rebels, combined with escalating U.S.-Iran tanker attacks, caused Brent crude to surge to $109. A scenario in which both the Hormuz and Bab el-Mandeb straits simultaneously fall under the control of the Iran-aligned bloc is becoming increasingly plausible. The United States, having withdrawn from its role in providing freedom of navigation in the Gulf as a public good since the shale revolution, continues to enforce sanctions selectively, notably excluding Chinese banks. This suggests a managed high-oil-price environment is more likely than a full-scale blockade. The baseline scenario, with a 45% probability, involves a new price range of $100–$110, up from the previous $88–$95, characterized by alternating periods of negotiation and tension. The pessimistic scenario of a complete dual blockade remains less likely. For South Korean companies, short-term priorities include real-time monitoring of blacklisted vessels, calculating the costs of bypassing the Bab el-Mandeb Strait, and ensuring the stability of long-term contract fulfillment. In the medium to long term, they must diversify crude oil sources to West Africa and the Americas, while managing U.S. demands to join sanctions against Iran as a separate issue.

I. Situational Analysis

Middle East Escalation and Risks in the Hormuz and Bab el-Mandeb Straits: A Situational Analysis

1. Background and Developments

The current crisis began on February 28, 2026, when the United States and Israel launched airstrikes against targets in Iran, triggering a full-scale war in the Middle East [8]. Iran responded militarily within days and subsequently initiated economic retaliation by disrupting the flow of oil and gas through the Strait of Hormuz [5].

Before the war, the Strait of Hormuz was a critical route through which roughly one-fifth of the world's oil and LNG supply passed [6]. Since the outbreak of hostilities, the strait has been under a de facto blockade [6][8].

On June 17, President Trump and the Tehran government signed the so-called 'Islamabad Memorandum,' which called for an immediate and permanent cessation of military actions on all fronts [6][11]. However, the Stockholm International Peace Research Institute (SIPRI) pointed out that a key provision of the memorandum contained language that de facto recognized Iran's authority to restrict passage through the Strait of Hormuz [11]. This has been interpreted as a sign that the United States is seeking to withdraw from its role in providing freedom of navigation in the Gulf as a public good [11].

The memorandum expired on August 17, after which the United States and Iran continued to dispute the facts surrounding passage through Hormuz [3]. Iran's Persian Gulf Strait Authority blacklisted 45 vessels, including a tanker owned by South Korea's Sinokor Merchant Marine. This is seen as the first instance demonstrating that Iran's unilateral passage regime has real enforcement capability [6].

2. Current Situation

On September 9, Brent crude surpassed $100.95 per barrel and WTI exceeded $95.60. The immediate trigger was an attack on Saudi energy facilities by Iran-backed Houthi rebels [2]. The UAE-based media outlet The National reported that U.S. forces destroyed five Iranian oil tankers in the Gulf of Oman and near Iran's Kharg Island [7]. In response, Iran's Islamic Revolutionary Guard Corps (IRGC) targeted two U.S. Navy warships, eight oil tankers, and ten other vessels, declaring the area around the Strait of Hormuz a 'danger zone' [7].

On September 10, tanker attacks between the United States and Iran escalated to their largest scale since the war began. Brent crude closed at $101.21, its highest level since late May [12][16]. On the same day, WTI also broke the $100 per barrel mark. The yield on the U.S. 30-year Treasury bond rose to 5.35%, its highest level since 2007 [1].

Houthi rebels captured the strategic Red Sea port of Mokha [4] and are continuing their advance along the coast toward the Bab el-Mandeb Strait [4]. The Indian media outlet Mint projected that the port's capture would deal an additional blow to Saudi oil export routes [18]. If the Houthis succeed in controlling this strait, both of the Middle East's main maritime oil transport routes—Hormuz and Bab el-Mandeb—would fall under the control of Iran-aligned forces [4].

On September 11, Brent crude surged over 6% to $109, its highest level since May [15]. It has since fluctuated around the $107 mark. The Australian Financial Review (AFR) reported that oil production forecasts for regions outside the Middle East are also being revised downward [15], raising the possibility that prices could remain above $100 for the rest of the year [15].

3. Key Actors and Positions

IranSince the expiration of the Islamabad Memorandum, Iran has been attempting to solidify its unilateral passage regime in the Strait of Hormuz as the de facto standard [3][6]. The blacklisting of vessels by the Persian Gulf Strait Authority signals that this regime has real enforcement power [6]. By attacking UAE vessels, Iran has demonstrated its resolve not to back down [3].

United StatesThe U.S. sanctioned over 60 entities under 'Operation Economic Outcast' but has adopted a selective enforcement approach, excluding major Chinese banks from the sanctions [6]. As stated by Vice President Vance, the priority of U.S. policy toward Iran has shifted from regime change and dismantling nuclear facilities to stabilizing consumer oil prices [9]. This is interpreted as a structural change linked to the U.S. transition to a net energy exporter following the shale revolution [9]. The Brookings Institution notes that the war has exposed the gap between Washington's professed Indo-Pacific priorities and its actual policies [8].

Houthi RebelsAs a pro-Iranian force in Yemen, the Houthis are expanding their control over the Bab el-Mandeb Strait by capturing Mokha [4]. They are also simultaneously attacking Saudi energy infrastructure [2].

Saudi ArabiaWith its energy facilities becoming direct targets of Houthi attacks, Saudi Arabia finds its crude oil export routes under threat [2][18].

Asian Importing Countries(China, India, Japan, and South Korea) rely on the Strait of Hormuz for approximately 80% of their crude oil imports. Nikkei Asia has reported growing concerns about inflation [14]. The Bangkok Post noted that as hopes for a permanent resolution to the six-month-long U.S.-Iran conflict fade, oil prices have risen by 25% since the beginning of last month [13].

4. Key Issues

First, whether the ambiguous language of the Islamabad Memorandum de facto condoned Iran's authority to restrict passage remains a legal and political issue [11]. This matter could have ripple effects beyond the Strait of Hormuz, impacting the principle of freedom of navigation worldwide [11].

Second, as the United States selectively applies sanctions enforcement to China, there is a possibility that its allies, including South Korea, could face demands to join sanctions and make military contributions under a different set of standards [6].

Third, if both the Hormuz and Bab el-Mandeb straits simultaneously fall under Iran's sphere of influence, the oil and LNG procurement routes for major Asian countries will become structurally vulnerable [4][6]. Fourth, because the reduction of U.S. security commitments in the Gulf is seen not as a personal negotiating style of the Trump administration but as a structural shift driven by expanded shale production, there is speculation that this trend could continue even after a change in administration [9].

II. In-Depth Analysis

Middle East Escalation and Risks in the Hormuz and Bab el-Mandeb Straits: An In-Depth Analysis

1. Analysis of Root Causes

The root cause of the current crisis is not a single event but a fundamental shift in U.S. policy priorities toward Iran. As Vice President Vance stated, U.S. policy objectives have moved from regime change or dismantling nuclear facilities to stabilizing consumer oil prices [9]. This signals that Washington is withdrawing from its long-standing practice of providing the public good of protecting Gulf sea lanes free of charge [9].

Behind this shift is the shale revolution. Total U.S. oil production has more than quadrupled since 2008 [9], transforming the country from a net energy importer to a net exporter [9]. EAI Professor Lee Wang-hwi has previously noted that this transition was anticipated as early as 2020 [9]. The analysis at that time was based on an optimistic view that the U.S. and Chinese energy supply-and-demand structures were complementary [9]. However, with the intensification of the trade war, the nature of the U.S.-China energy relationship has changed from 'win-win' to 'zero-sum' [9].

The second root cause is that as the United States withdraws from its security commitments in the Gulf, Iran is seeking to fill the resulting vacuum. A key provision of the Islamabad Memorandum contains language that de facto recognizes Iran's authority to restrict passage through the Strait of Hormuz [11]. SIPRI has warned that if this language is incorporated into a final peace treaty, it could have economic, political, and legal repercussions for freedom of navigation not only in the Gulf but worldwide [11]. The blacklisting of 45 vessels, including a tanker owned by South Korea's Sinokor Merchant Marine, by Iran's Persian Gulf Strait Authority is evidence that this unilateral passage regime already has real enforcement power [6][3].

A third cause is the Houthi rebels' independent motives for escalation. Although the Houthis are an Iranian proxy, they have their own objectives in the Yemeni civil war, namely securing their own territory and ports. The capture of the strategic Red Sea port of Mokha is a military advance toward controlling the Bab el-Mandeb Strait [4]. If this trend continues, a situation will be created where both the Hormuz and Bab el-Mandeb straits fall simultaneously under the control of Iran-aligned forces [4]. This is not merely an escalation but a structural shift that would allow the Iran-aligned bloc to use two chokepoints as simultaneous leverage.

2. Structural Context

Political Structure

The Trump administration's Iran policy set low oil prices as a top priority in its economic war against Tehran [3]. However, during the current phase of escalation, oil prices have instead soared past $100 to as high as $109 per barrel [15], widening the gap between policy goals and actual outcomes. This discrepancy is linked to observations that Washington's Middle East policy conflicts with its Indo-Pacific priorities. The Brookings Institution assessed that the war with Iran has widened the gap between the United States' professed Indo-Pacific priorities and its actual policies [8]. The structure is such that the more military and diplomatic resources the U.S. reinvests in the Middle East, the fewer resources are available to counter China.

The U.S. approach to enforcing sanctions against Iran also reveals political selectivity. While sanctioning over 60 entities under 'Operation Economic Outcast,' the U.S. excluded major Chinese banks [6]. This shows that within the context of U.S.-China strategic competition, sanctions against Iran are being applied selectively based on political calculations rather than pure non-proliferation and security logic. Some observers anticipate that South Korea could face similar demands for a package of sanctions participation and military contributions [6].

Economic Structure

Before the war, the Strait of Hormuz was a route for about one-fifth of the world's oil and LNG supply [6][8]. If this physical chokepoint is blockaded or its passage regime is restructured in Iran's favor, procurement costs for Asian energy importers will structurally increase. China, India, Japan, and South Korea are a group of nations that are overwhelmingly dependent on crude oil imports passing through this strait. While the United States has enhanced its energy self-sufficiency through increased shale production, an asymmetric structure has become entrenched in which these four Asian countries remain fully exposed to the risks, having failed to reduce their dependence on the Gulf.

The surge in U.S. Treasury yields is another consequence of this structure. The 30-year Treasury yield's rise to 5.35% is its highest level since 2007 [1]. This indicates that fears of oil price-driven inflation have pushed up risk premiums across the bond market. The Nihon Keizai Shimbun reported that a major commodity price index reached an 18-year high [14]. The transmission channel through which energy-driven inflation spreads to the broader financial markets is already active.

Security Structure

Although the Hormuz and Bab el-Mandeb straits are geographically separate, from the perspective of the Iran-aligned bloc, they are treated as a single group of strategic assets. The simultaneous timing of the Houthi capture of Mokha and Iran's restrictions on passage through Hormuz can be interpreted not as a coincidence but as an intentional move by the Iran axis to manage both chokepoints in concert [4]. The IRGC's declaration of the area around the Strait of Hormuz as a 'danger zone' and its targeting of U.S. Navy warships and tankers is a military signal intended to demonstrate its effective control over the strait [7].

3. Comparison with Historical Precedents and Similar Cases

This is not the first attempt to blockade or threaten the Strait of Hormuz. During the 'Tanker War' of the 1980s Iran-Iraq War, both sides targeted each other's maritime shipping routes in the Gulf. At that time, the United States intervened by reflagging Kuwaiti tankers with the U.S. flag and providing escorts. The difference in the current situation lies in the U.S. motivation for intervention. In the past, protecting Gulf oil producers was seen as a clear U.S. national interest. Today, as a net energy exporter itself, the U.S. incentive to intervene has structurally weakened [9].

The 2019 tanker attacks in the Strait of Hormuz also serve as a relevant precedent. That incident was a one-off provocation, and its impact on international oil prices was temporary. The current crisis is different in nature, as it is a full-scale war that has lasted for over six months. The repeating cycle of negotiation and breakdown, exemplified by the signing and expiration of the Islamabad Memorandum, also distinguishes it from past one-off crises [3][6].

The Houthi maritime threat in the Bab el-Mandeb Strait is an extension of their attacks on shipping in the Red Sea during 2023–2024. At that time, the Houthis disrupted the Red Sea shipping route by targeting commercial vessels. The current situation represents an escalation, as they are now attempting to seize coastal control by directly capturing ports [4]. Their tactics have thus been upgraded from maritime attacks to territorial acquisition.

4. Key Variables Shaping Future Developments

The first variable is the future of the Islamabad Memorandum. The agreement has already expired once, and whether it will be renegotiated is unclear [3]. Given that Oman has served as a mediation channel between the U.S. and Iran, the continuation of its mediation efforts will function as an early warning indicator [3][6].

The second variable is whether the Houthis can gain full control of the Bab el-Mandeb Strait. If they follow their capture of Mokha by securing the coastline near the strait, Saudi Arabia's entire crude oil export route will be affected [18][19]. In that case, the worst-case scenario—in which both the Hormuz and Bab el-Mandeb straits are simultaneously exposed to risks from Iran-aligned forces—would become a reality.

The third variable is whether U.S. sanctions enforcement becomes symmetrical. Currently, enforcement is selective, excluding major Chinese banks [6]. As long as this selectivity continues, China can procure Iranian crude oil through indirect channels at a relatively low cost, while U.S. allies like South Korea are likely to face stronger pressure to join the sanctions.

The fourth variable is the interaction between U.S. Treasury yields and inflationary pressures. With the 30-year yield already in the mid-5% range [1], a further rise in oil prices would narrow the Federal Reserve's room for maneuver on monetary policy. This would also have secondary ripple effects on the import prices and exchange rates of Asian countries.