In brief
Will the Bab el-Mandeb Strait become effectively closed to shipping by the end of 2026? Polymarket traders assign a 17.5% probability to this outcome, meaning they see the Strait's average daily transits dropping to 10 or fewer by December 31. Our analysis, based on escalating Houthi attacks and the broader Iran war context, suggests a higher 25% probability.
Introduction
The Bab el-Mandeb Strait, a critical chokepoint connecting the Red Sea to the Gulf of Aden, is under increasing threat from Houthi rebels in Yemen. With the Strait of Hormuz already effectively shut by Iran, global attention has turned to this waterway, through which around 8% of the world's oil passes (Source 8). Polymarket's prediction market asks: will the Strait be effectively closed, defined as a 7-day moving average of ship arrivals ≤10, by the end of 2026?
What to know
The Houthis, backed by Iran, have escalated attacks along Yemen's Red Sea coast. According to the Wall Street Journal (Source 1), the rebels have stepped up attacks near the Bab el-Mandeb and shut down operations at a strategic seaport. Yemen's government warns that the Houthis plan to seize control of the Strait (Source 2, Source 3). The Times of Israel reports that greater Houthi control would choke off Saudi oil exports, already affected by the Hormuz closure (Source 3).
Recent incidents include a Houthi attack on a Yemeni commercial vessel that killed six people (Source 6), the first fatalities in such strikes since the Iran war began. Reuters (Source 5) reports continued attacks on shipping despite talks. The Hill notes that Red Sea shipping has already slowed, with 8% of global oil transiting the area (Source 8). An Al Jazeera analysis (Source 4) warns that a complete Houthi blockade could affect 7% of global oil supplies and be expanded to US-aligned countries.
The market numbers
| Outcome | Implied Probability |
|---|---|
| December 31, 2026 | 17.5% |
| October 31, 2026 | 11.0% |
| September 30, 2026 | 6.5% |
| September 15, 2026 | 3.6% |
| August 31, 2026 | 0.7% |
Total volume on this market is over $11 million, with liquidity above $530,000, indicating significant trader interest. The combined probability of closure by any date is 39.3%, but the largest single probability is placed on December 31.
The factors at play
- Houthi military capability: The rebels have shown they can attack vessels with missiles and drones, causing casualties (Source 6). Their willingness to escalate is high, especially in the context of the Iran war.
- Iran war context: With the Strait of Hormuz effectively closed by Iran (Source 5), the Bab el-Mandeb becomes a strategic alternative for Saudi oil exports. Houthi actions are part of a broader Iranian strategy (Source 4).
- International response: The US Navy has already disabled ships violating the Iran blockade (Source 5). A more robust military response could deter Houthi attacks or protect shipping, reducing closure risk.
- Diplomatic efforts: Talks between the US and Iran are ongoing but have hit impasses (Source 5). A broader resolution could de-escalate Houthi actions.
- IMF PortWatch data: The market resolves based on data from IMF PortWatch. Shipping companies may reroute further, reducing transits even without a formal blockade.
Our prediction
According to our analysis, the most likely outcome is December 31, 2026. Polymarket currently assigns a probability of 17.5%, while our internal estimate is 25%. The difference stems from these factors: (1) the Houthis are intensifying their campaign, with recent fatal attacks (Source 6) suggesting greater capability; (2) the Iran war shows no signs of ending, and the Strait of Hormuz closure increases pressure on alternative routes; (3) traders may be underestimating the cumulative effect of sustained attacks on shipping operations; (4) the IMF data definition (7-day moving average ≤10) is a relatively low threshold that could be reached with continued disruption.
Risks and uncertainties
- Military deterrence: A strong US-led naval response could protect shipping and keep transits above 10, reducing closure probability.
- Diplomatic breakthrough: If the Iran war ends, Houthi attacks might cease, lowering risk.
- Data lags or revisions: The market's resolution depends on IMF data publication and potential revisions, which could affect outcomes.
- Houthi overreach: An attack that triggers a major military retaliation could set back their capabilities.
- Alternative routes: Shipping companies may increasingly bypass the Bab el-Mandeb, which could reduce transits even if the strait is not formally closed.
Conclusion
The Bab el-Mandeb Strait faces its highest risk of effective closure in years, driven by Houthi escalation and the broader Iran war. While Polymarket gives a 17.5% chance of closure by end of 2026, our analysis suggests a 25% probability, reflecting the intensifying threat and limited diplomatic progress. Traders should watch for further Houthi attacks, international naval deployments, and any developments in US-Iran talks.
This content is for informational purposes only and does not constitute financial, political or investment advice, betting advice, or any operational recommendation.