Rerouting-Infrastructure-And-Secondary-Chokepoint-Risk
Sources: 1 • Confidence: High • Updated: 2026-04-03 03:53
Key takeaways
- Constriction or closure of Bab el-Mandeb is described as a major escalation risk because it threatens the Red Sea route near Houthi operating areas, including flows via Yanbu.
- Rory Johnston argues a belief among key U.S. political actors that the U.S. does not need Hormuz is accelerating a rollback of the Carter Doctrine-style commitment to Gulf oil flow security.
- As of an April 1 recording, the Strait of Hormuz is closed while a U.S. and Israeli military campaign against Iran is in its second month.
- The crisis is presenting as a spot-market shock with extreme backwardation because traders keep expecting near-term resolution.
- Even at very high prices, U.S. liquids supply growth is described as too slow to quickly replace large losses, with an example claim that offsetting a 10 million bpd shortfall could take about five years, implying demand destruction is required to rebalance.
Sections
Rerouting-Infrastructure-And-Secondary-Chokepoint-Risk
- Constriction or closure of Bab el-Mandeb is described as a major escalation risk because it threatens the Red Sea route near Houthi operating areas, including flows via Yanbu.
- A key open risk identified is whether the Houthis will target shipping and/or strike Yanbu port and related East–West pipeline infrastructure.
- Blocking Bab el-Mandeb would force longer routes that more than double transit times to Asia, creating a near-term effective loss of supply due to shipping capacity constraints.
- If Bab el-Mandeb is blocked while Hormuz is disrupted, rerouting Saudi exports via Yanbu becomes far less viable and the supply shortfall worsens.
- The Saudi East–West Pipeline to Yanbu on the Red Sea is described as the primary rerouting offset when Hormuz is blocked.
- Rory Johnston forecasts that if the Houthis effectively block Bab el-Mandeb, Saudi effective supply to market would be materially reduced in the short term because full Yanbu flows cannot be fully rerouted through Suez.
Political-Endgames-And-Persistent-Risk-Premium-Dynamics
- Rory Johnston argues a belief among key U.S. political actors that the U.S. does not need Hormuz is accelerating a rollback of the Carter Doctrine-style commitment to Gulf oil flow security.
- The Wall Street Journal reported that Trump is increasingly open to ending the Iran war without the Strait of Hormuz being reopened.
- A tolling-and-partial-control outcome is described as politically untenable for Gulf states and as a setup for recurring flare-ups because Iran’s missile and nuclear programs persist and Israel may strike again.
- Rory Johnston forecasts the most likely near-term scenario is that Trump declares the conflict over and unilaterally pulls back U.S. naval assets after prices rise further.
- Rory Johnston forecasts that even if de-escalation headlines cause an oil price selloff, prices could later grind higher as physical losses are recognized and the futures curve becomes less backwardated.
- Rory Johnston forecasts that after a U.S. pullback, Iran could maintain quasi-control of the Strait via tolling while allowing only partial flow such as 50–60% of pre-war volumes.
Hormuz-Closure-Scale-And-Net-Deficit
- As of an April 1 recording, the Strait of Hormuz is closed while a U.S. and Israeli military campaign against Iran is in its second month.
- Rory Johnston previously viewed a Strait of Hormuz closure as a low-probability scenario and did not expect to see it occur.
- Rory Johnston estimates pre-war flows through Hormuz were about 20 million barrels per day and that optimistic rerouting reduces the effective loss to roughly 13 million barrels per day.
- Rory Johnston argues the near-term net oil market imbalance is a 5–7 million barrel per day deficit that must be absorbed by inventories after rerouting and temporary offsets.
Physical-Transmission-Lags-And-Term-Structure-Signals
- The crisis is presenting as a spot-market shock with extreme backwardation because traders keep expecting near-term resolution.
- The full physical impact of the shutdown is delayed because ships that departed before the closure are still arriving, after which an 'air pocket' of missing barrels will emerge.
- Rory Johnston forecasts that the final pre-closure Gulf cargo arrivals will hit Asia first, then Europe, then North America over successive weeks, after which missing-flow impacts become visible.
- Rory Johnston forecasts that by the end of April, physical supply-chain bunching will overwhelm sentiment support and push oil prices higher as the crisis transmits into end markets.
Tail-Risks-Upstream-Damage-And-Slow-Supply-Response
- Even at very high prices, U.S. liquids supply growth is described as too slow to quickly replace large losses, with an example claim that offsetting a 10 million bpd shortfall could take about five years, implying demand destruction is required to rebalance.
- Rory Johnston forecasts a roughly 30% chance of escalation to boots-on-the-ground operations that keep the Strait closed for months and increase the likelihood of Iranian strikes on regional upstream assets.
- Reuters reported that after Israel attacked Iran’s South Pars gas field, Iran retaliated by striking Qatar’s Ras Laffan facility, and QatarEnergy’s CEO said LNG export capacity was reduced by 17% potentially for up to five years.
- Rory Johnston forecasts that if attacks expand to major Gulf upstream assets, the shock becomes multi-year and could drive crude above $200 with expensive products and a global recession.
Watchlist
- Constriction or closure of Bab el-Mandeb is described as a major escalation risk because it threatens the Red Sea route near Houthi operating areas, including flows via Yanbu.
- A key open risk identified is whether the Houthis will target shipping and/or strike Yanbu port and related East–West pipeline infrastructure.
Unknowns
- What is the current and evolving actual throughput through the Strait of Hormuz (including any partial or informal transit regime), and how does it compare to pre-closure volumes?
- What is the realized net daily market imbalance after accounting for rerouting, demand response, strategic releases, and any sanction-related supply additions?
- What are the actual timing and magnitude of the predicted 'air pocket' in delivered crude and products across Asia, Europe, and North America?
- How much have refinery run cuts persisted in Asia, and are they driven primarily by feedstock scarcity, margin risk, or policy direction?
- What is the true binding constraint: crude availability, middle distillate production capacity, shipping/ton-mile capacity, or domestic price-control regimes?