Escalating Middle East tensions, particularly Iranian and Houthi threats to disrupt or close the Bab el-Mandeb Strait amid ongoing conflicts with Israel and the U.S., represent the primary driver of trader sentiment. The waterway handles roughly 4-5 million barrels per day of oil and petroleum liquids transit, down from prior peaks due to selective attacks and elevated insurance premiums that have already prompted major carriers to reroute around the Cape of Good Hope, adding 10-14 days and substantial fuel costs to voyages. Recent developments include Houthi missile and drone activity resuming in early 2026 after a brief post-ceasefire lull, with fresh warnings in April tied to broader regional escalation potentially affecting Suez Canal volumes and global supply chains. Market-implied odds reflect uncertainty over sustained low transit levels per IMF PortWatch metrics, with key swing factors including any U.S.-Iran diplomatic shifts or intensified proxy actions before mid-year resolution dates.