Today is not a good-news day for the energy sector—not from where I’m sitting.
Look at the map. Iran-backed Houthis have seized strategic territory near the Bab el-Mandeb Strait, the narrow chokepoint connecting the Red Sea to the Gulf of Aden. Before Houthi attacks diverted much of the traffic, roughly 8.7 million barrels of crude oil and petroleum products moved through the strait each day. Meanwhile, Saudi Arabia has shut down its East-West pipeline following a drone attack attributed to Iran-backed militias. That pipeline ordinarily carries between 2.6 million and 4 million barrels per day.
Put it together, and nearly 13 million barrels of daily energy traffic or capacity is under pressure. What is happening in the Middle East has the potential to trigger one of the most serious energy-supply shocks of the decade.
The official response is already surfacing in public statements. Vice President J.D. Vance recently addressed the Houthi situation, emphasizing direct engagement and the administration’s awareness of developments in the Red Sea.
That is careful framing. It signals that communication channels exist and that the United States is monitoring the threat to shipping in real time. Yet the physical reality on the water remains unchanged: A critical artery is contested, and the oil that normally passes through it is now vulnerable to interruption or diversion.
Markets do not wait for diplomatic reassurance. They begin pricing disruption as soon as the first tanker slows down, changes course or declines to enter the area.
President Trump appears reluctant, at least publicly, to broaden the conflict. During a press conference with Ireland’s prime minister—a meeting we will discuss in greater detail later this week—Trump was asked whether he believed Iran was responsible for the attack on Saudi Arabia’s pipeline.
Here is how he answered:
Trump is not backing away from his confrontation with Iran, but he does not appear eager to open another front just yet.
That distinction matters. Even if the Houthis seek to avoid a direct confrontation with the United States while continuing to project power over the strait, the immediate danger to American assets could remain contained. The energy risk would not.
Nearly nine million barrels a day is not a side issue. It is a structural part of the global energy system. Any sustained reduction forces buyers to compete for alternative cargoes and shipping routes, tightening markets far beyond the Middle East.
The administration has also pointed to potential supplies outside the region as a partial buffer. Secretary of State Marco Rubio recently discussed the possible contribution of Venezuelan production under a new framework.
Venezuelan oil would matter if it could be brought online at sufficient scale and supported by reliable infrastructure. But meaningful increases in production cannot be summoned overnight. New investment, equipment, maintenance and logistics all take time.
The immediate arithmetic is unforgiving: Lost or impaired Saudi and Red Sea volumes cannot be replaced quickly by any single alternative source.
If you are looking for a more encouraging angle, Trump has pointed to another factor behind rising fuel prices—and one his administration is attempting to address.
Diesel and jet fuel are already being squeezed from several directions. Any additional disruption to Russian petroleum-product exports would compound the pressure created by constraints on Middle Eastern crude.
When diesel becomes more expensive, transportation costs rise. When transportation costs rise, so does the price of moving food, machinery and consumer goods. The effects do not remain confined to the gas station.
Here is what I believe could happen next in the Middle East, based on the scenario I am watching.
Saudi Arabia could turn to Pakistan for support. If Islamabad hesitates, Riyadh has considerable economic leverage through loans, trade and the remittances sent home by millions of Pakistani workers in the kingdom. A closer Turkish-Pakistani-Saudi alignment could then alter Israel’s strategic calculations and deepen an already dangerous regional contest.
That is where things could get very spicy.
While the United States is occupied with the Middle East, China could find new opportunities to apply pressure around Taiwan, the South China Sea or critical energy corridors.
Russia, meanwhile, will continue watching the long-range weapons and military equipment flowing to Ukraine from European factories. If Moscow were to retaliate against production or logistics sites beyond Ukraine, the financial consequences could be immediate. Bond yields could surge, the housing market could weaken further and the broader economy could move toward stagflation—a miserable combination of high prices and stagnant growth.
The second-order effects could travel faster than many economic models anticipate.
Urea and other fertilizer shipments could be disrupted. Diesel and jet fuel could become scarce. Refining margins—the difference between the cost of crude oil and the value of the products refined from it—could climb sharply. Supplies of helium and sulfur used in sulfuric-acid production could tighten.
Nickel and copper prices could rise as supplies contract while demand from the defense and energy sectors remains. Semiconductor manufacturers could encounter material constraints. Fertilizer markets could become exceptionally volatile.
If those conditions persisted for one or two years, food insecurity could intensify across countries already vulnerable to energy, fertilizer and grain shocks, including Egypt, Yemen, Bangladesh, India, Sri Lanka, Pakistan, Nigeria, Tunisia, Morocco, Kenya, Jordan, Lebanon, South Africa, Myanmar, Ethiopia, Somalia and Afghanistan.
Political upheaval often follows severe food inflation and shortages. The Arab Spring demonstrated how economic stress can combine with public anger and political instability. A larger, longer-lasting supply shock could produce even greater humanitarian and migration pressures.
Those pressures would not remain contained. Europe could face another major wave of migration as people fled hunger, economic collapse and conflict.
None of this is inevitable. It is a chain of possible second- and third-order consequences stemming from an energy disruption already underway.
The Bab el-Mandeb is not merely another waterway. It is a critical artery. The Saudi pipeline is not merely another piece of infrastructure. It is a major export outlet. When both are threatened at the same time by actors aligned with Iran, markets have reason to price in scarcity risks extending well beyond the barrels immediately affected.
The public statements we have heard represent the visible layer of crisis management. They acknowledge the seriousness of the situation and attempt to shape expectations. But public messaging has limits when the physical arteries of the energy trade are being contested by actors operating with very different calculations of risk.
Nearly 13 million barrels of daily traffic or capacity under pressure is not a rounding error. It is a strategic event.
The market’s verdict will be written in diesel prices, fertilizer costs, copper and nickel supplies—and, eventually, the price of bread in Cairo, Karachi and Lagos.
I am not saying the sky will fall tomorrow morning. I am saying that the conditions for a multiyear cycle of energy and food stress are assembling in plain sight.
Watch the Red Sea. Watch the Saudi pipeline. Watch fertilizer inventories and company balance sheets. Watch the bond market’s reaction to further escalation. And watch the countries most exposed to rising food and energy costs.
The next two years will tell us whether this remains a regional crisis with global price effects—or becomes something much larger.