Yemen's Houthi militants have seized two strategic islands in the Red Sea, reinforcing the Iran-backed group's ability to control one of the world's most important shipping routes as concerns mount that the world is facing a new oil supply crisis. The seizure of the islands of Greater and Lesser Hanish is the latest step in the militant group's swift advance across Yemen's Red Sea coast, following the capture of the port of Mokha and Perim island in the Bab al-Mandab strait. The newly taken islands lie 160km north of the strait, a chokepoint that connects the Red Sea to the open ocean and to Saudi Arabia's key Asian markets. The speed of the advance has left Yemen's Saudi-backed government trying to claw back territory captured in recent days, while Riyadh simultaneously grapples with attacks on a critical oil pipeline by Iran-allied militants in Iraq. ## Humanitarian Toll Mounts Along the Coast Nearly 94,000 people in Yemen have fled their homes since fighting between the Houthis and government forces escalated this month, the International Organization for Migration said on Monday. About 200 schools have been converted to shelters in south-western Yemen to absorb an influx of families, the International Rescue Committee said. More than 2,000 people have reportedly fled across the sea into Djibouti. The Houthi advance has brought the group's forces within 32km of a US military base in the small country on the Horn of Africa, on the other side of the Bab al-Mandab strait. Threats from the Houthis have left Saudi Arabia on high alert, with air alerts flashing across the country daily. A series of attacks carried out by the militant group using ballistic missiles and drones wounded 13 civilians on Monday. ## Pipeline Closure Squeezes Oil Exports The closure of Saudi Arabia's east-west pipeline, which has been vital for moving oil from the Strait of Hormuz to the Red Sea export hub of Yanbu, is piling further pressure on shipments and global oil supplies. Officials have estimated the pipeline could take weeks to fully repair after drone strikes blamed on an Iran-backed militia in Iraq forced its shutdown. Research company Rystad Energy said that since late August, an average of 2.6 million to 4 million barrels of oil a day moved through the pipeline and out of the port of Yanbu, a volume it said was now at risk of "disappearing from the market." "The big question for traders right now is the duration of the east-west outage. Any prolonged disruption and the associated supply loss could easily push prices to the next level higher," said Tim Waterer, chief market analyst at KCM Trade. Janiv Shah, vice-president of oil markets for Rystad Energy, noted that the recent jump in Brent prices proved the market was already responding to "a significant loss of supply." Saudi inventories could sustain exports in the coming days, but that could "change quickly," Shah added. On Tuesday morning, Brent crude oil rose 1.17% to $106.92 a barrel. The average price of diesel in the US hit $6 per gallon for the first time last week, as the Iran war, combined with Ukrainian attacks on Russian refineries, squeezed supply. ## Market Buffers Are Gone, Warns Chevron Chief Market experts say the stock buffers that existed in the system earlier this year, shielding consumers from the worst effects of an oil shock by limiting price increases, have now largely disappeared. Since the war began in February, countries have released some crude stockpiles to the market, and the US lifted restrictions on oil stored on ships floating at sea from countries under sanctions. Those buffers have now been "played out," Chevron CEO Mike Wirth said on Friday. "It's harder to envision a scenario where prices soften and quickly," Wirth said. "I think the risks remain to the upside over the next few months." The Houthi leadership has said it is not seeking to block all commercial shipping in the Red Sea, only Saudi-linked ships. But supplies from Saudi Arabia, the world's biggest exporter of oil, are vital to economies across Africa and Asia, which rely heavily on Middle East oil imports and have been hit hardest by the disruption to trade routes. By claiming thousands of kilometres of territory in a matter of days and seizing strategically important islands, the Houthis now hold the Bab al-Mandab strait, the second major regional energy chokepoint after the Strait of Hormuz to come under threat during the conflict. For global markets already absorbing the loss of the pipeline route, the group's control of the approaches to the Red Sea represents a structural shift in how oil moves from the Gulf to Asian and European buyers, and analysts warn the consequences will be measured in months rather than days. A halt to shipping through the strait could also prove far more protracted than the pipeline outage, because rerouting oil north is a slower and more expensive path to Asian markets and does not preclude further attacks by the Houthis, who are also targeting oil facilities.