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The Middle East war is rapidly escalating, is the oil route Plan B also in jeopardy?

The Middle East war is rapidly escalating, is the oil route Plan B also in jeopardy?

硅基星芒硅基星芒2026/03/29 23:58
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By:硅基星芒

Morning FX

The US-Israel-Iran conflict has entered its fifth week over the weekend, and the risk of the conflict spreading is increasing significantly.

1. Rapid expansion of the conflict—everyone wants to get involved

  • Yemen's Houthi forces have officially joined the war, "using a powerful ballistic missile for the first time" to attack sensitive Israeli military targets in support of Iran. The participation of the Houthi forces, along with Iran and Hezbollah in Lebanon, forms a triple-front assault that not only increases pressure on the US and Israel, but also causes a surge in air defense pressure across the entire Middle East.

The Middle East war is rapidly escalating, is the oil route Plan B also in jeopardy? image 0
  • In the face of continued Iranian attacks and harassment, Gulf countries such as Saudi Arabia and the UAE have drastically changed their stance. Saudi Arabia has agreed to let US troops use its air bases and has expelled Iranian diplomats. Kuwait, UAE, Bahrain, Saudi Arabia, Qatar, and Jordan have issued a joint statement condemning Iran’s violation of sovereignty and reserving the right to self-defense. While the Gulf states remain cautious about joining the war, if Iran attacks their key power or water infrastructure, joining the US-Israel camp may become inevitable.

2. Targeting the Bab el-Mandeb Strait—plan B risks are also rising

After the Strait of Hormuz was controlled, Saudi Arabia sought an alternative route: transporting crude oil from its eastern production areas along the Persian Gulf coast to the port of Yanbu on the Red Sea via pipelines— from there heading south through the Bab el-Mandeb Strait into the Gulf of Aden, allowing ships to reach the Indian Ocean and eventually major Asian markets, and heading north through the Suez Canal into the Mediterranean toward Europe (fully loaded oil tankers are too deep-draft to cross the Suez Canal directly and must unload at Egypt's Ain Sokhna port for transfer by the SUMED pipeline to Mediterranean ports, which severely limits capacity).

The Middle East war is rapidly escalating, is the oil route Plan B also in jeopardy? image 1

However, the involvement of the Houthi forces has made the Bab el-Mandeb Strait highly vulnerable. If it is also blocked, this "double chokehold"  could lead to a global maritime crude supply gap exceeding 24 million barrels per day. Under the pressure of panic sentiment and actual shortages, international oil prices may break through previous highs, and the resulting systemic rise in global energy and logistics costs will further intensify global inflationary pressures.

The Middle East war is rapidly escalating, is the oil route Plan B also in jeopardy? image 2

3. Summary

The Middle East war is like a runaway train crashing through, flattening global risk assets—including FX markets. In the short-term, the USD will undoubtedly be supported by safe haven flows and oil prices, but the complex situation will also make it highly volatile and difficult to handle. The EUR, AUD, and most emerging market currencies will remain under pressure, while JPY and CNY, though also affected, are relatively more resilient. In terms of trading, to hedge persistent escalation risk, consider shorting EURJPY, EURCNY and other crosses.

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    Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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