https://www.wsj.com/world/middle-east/iran-oil-houthis-shipping-terrorism-bfa4fd9b?mod=hp_lead_pos7
Washington’s Deadly New Headache: an al Qaeda-Houthi Terrorist Alliance
One man helped broker an arms trade between two militant groups that threatens another key oil-shipping route in the Middle East
By Michael M. Phillips, The Wall Street Journal, Aug. 31, 2026
…
With the Strait of Hormuz all but closed by Iranian forces, the gulf could serve as an escape route for Middle East oil. Except the Houthis have come to the aid of their allies in Tehran, attacking Saudi-linked oil tankers with missiles and drones in the Red Sea…
…
The Houthis [in Yemen] and al-Shabaab [in Somalia, al Qaeda’s largest and most lucrative affiliate] had been sectarian adversaries until Jibril and others brokered a partnership that now threatens to further destabilize the Middle East and energy markets worldwide. Their home countries, Yemen and Somalia, sit on opposite shores of the Gulf of Aden, through which 12% of the world’s seaborne oil passed before the Iran war…
The Houthis are predominantly Shia Muslims but al-Shabaab adheres to Sunni Islam…Common enemies, however, now unite the Houthis and al-Shabaab. “They hate the West, they hate Israel…” [end quote]
I’m interested in the impact of terrorist groups cutting the flow of oil from the Red Sea. (Though the situation could turn even messier than the currently-running civil wars in those countries as the U.S. and Israel are tangentially involved.)
Around 20% of global petroleum passes through the Strait of Hormuz, while roughly 8–12% moves through the Bab el-Mandeb Strait. If both routes are severely blocked or under high-risk fire, nearly 25–30% of global seaborne crude supplies face acute disruption simultaneously.
Oil futures (Brent and WTI) do not merely react to physical shortages; they react to panic and perceived geopolitical risk. Markets immediately price in severe risk premiums, likely pushing crude well past $100 to $120+ a barrel in the short term, with extreme upside risk if military escalation continues.
Beyond raw crude oil, the Red Sea corridor is a primary transit lane for refined petroleum products (diesel, jet fuel, and naphtha) moving from Middle Eastern refineries to European consumers. Severe disruptions directly trigger spikes at the pump for transport fuels and heating oil.
Sustained oil prices above $100/barrel create broad inflationary pressures across transport, manufacturing, and agriculture (fertilizer production), forcing central banks to hold interest rates higher for longer.
This is reminiscent of the 1973-1974 oil shock which caused a massive drop in the stock market. During the 1973 Arab oil embargo, the S&P 500 plunged roughly 45% over a 20-month period.
These are U.S. companies that would benefit from this specific problem:
Summary of Relative Performance
| Energy Sub-Sector | Likely Relative Performance | Key Driver / Rationale |
|---|---|---|
| Pure-Play E&P (COP, EOG, FANG) | Highest Outperformance | Direct, unhedged exposure to surging crude prices; no refining margin squeeze. |
| Permian/Gulf Exporters (OXY) | Very High Outperformance | Access to U.S. export terminals allowing sales at international premiums. |
| Integrated Majors (XOM, CVX) | Strong Outperformance | Scaled global/domestic production offsets higher refining input costs. |
Wendy