The war has entered its 27th day. The White House issued a new warning to Iran, stating that if it does not agree to end the conflict, it will face “even more severe strikes.” However, Tehran’s response has raised even greater concern in markets. Iranian military sources warned that if pressure is applied in the Persian Gulf or the Gulf of Oman, Iran will open a new front in the Bab el-Mandeb Strait.

Bab el-Mandeb: The “Second Card” After Hormuz

The Bab el-Mandeb Strait connects the Red Sea and the Gulf of Aden and serves as a vital corridor linking the Atlantic, Mediterranean, and Indian Oceans. Around 12% of global trade and 30% of container shipping pass through the Suez Canal, with Bab el-Mandeb acting as the southern gateway to the Red Sea.

If this route is disrupted, shipping companies would be forced to reroute around the Cape of Good Hope, significantly increasing transportation costs and triggering ripple effects across global supply chains and product prices.

Iranian military sources made their stance clear: “Iran has both the will and the capability to threaten the Bab el-Mandeb Strait. If the U.S. attempts reckless actions to reopen the Strait of Hormuz, it should be careful not to create another chokepoint that will bring even greater trouble.”

This is not an empty threat. A senior member of Yemen’s Houthi political bureau previously stated that the group is considering all options to support Iran and could target ships belonging to countries involved in attacks against Iran and its allies if the strait were to be closed.

Escalating Conflict and a Negotiation Deadlock

The conflict continues to intensify. U.S. and Israeli airstrikes on Iran have expanded in scope, with explosions reported in Tehran, Tabriz, Isfahan, and Shiraz. Israeli Prime Minister Benjamin Netanyahu stated on the 25th that military operations against Iran are continuing “at full force.” According to The New York Times, Israel fears that Trump could abruptly end the war, prompting Netanyahu to order maximum destruction of Iran’s military-industrial infrastructure within 48 hours.

Iran responded with the 80th and 81st waves of its “True Promise-4” operation, targeting Israeli military sites in Haifa, Dimona, and Tel Aviv, as well as U.S. bases in Kuwait, Jordan, and Bahrain. The Islamic Revolutionary Guard Corps also claimed it had shot down a U.S. F-18 fighter jet, which reportedly crashed into the Indian Ocean.

Meanwhile, the United States is increasing its military deployment. In addition to multiple Marine Expeditionary Units moving into the region, thousands of troops from the U.S. Army’s 82nd Airborne Division are being deployed to the Middle East. Although House Speaker Mike Johnson described this as a “deterrent measure,” many observers believe Washington is preparing for a potential ground operation.

Perhaps the most perplexing aspect is the complete divergence between U.S. and Iranian narratives regarding negotiations. The White House insists that talks are ongoing and “productive,” while Iran — from its Supreme Leader to its foreign minister and parliamentary leadership — has categorically denied any direct negotiations.

According to foreign media reports, the U.S. has proposed a 15-point ceasefire plan to Iran via Pakistan. The proposal reportedly requires Iran to abandon its nuclear program, limit missile capabilities, cease support for the “Axis of Resistance,” and ensure free navigation through the Strait of Hormuz. In return, the U.S. would consider a one-month ceasefire to allow negotiations.

Iran has put forward its own five conditions: an immediate halt to military actions, guarantees against future conflict, war reparations, an end to attacks on the “Axis of Resistance,” and recognition of Iran’s sovereignty over the Strait of Hormuz.

Iranian officials have sharply rejected the U.S. proposal. A spokesperson for Iran’s Khatam al-Anbiya Central Headquarters stated, “Do not disguise your failures as an agreement.” Meanwhile, Iran’s government communications chief described the U.S. proposal as “a list of unrealistic fantasies.”

What Does a “Second Front” Mean for Markets?

First, it represents a strategic backup to Iran’s blockade of the Strait of Hormuz. With roughly 20% of global seaborne oil already disrupted, a closure of the Bab el-Mandeb Strait would put over 30% of global container shipping and 12% of trade at risk, forcing rerouting and significantly raising transportation costs.

Second, it directly challenges the narrative promoted by the Trump administration. While the White House seeks to use signals of negotiation to suppress oil prices and calm markets, Iran continues to counter this with military escalation and threats of opening new fronts. As long as this contradiction — “talks on one hand, conflict on the other” — persists, the geopolitical risk premium embedded in oil prices is unlikely to dissipate.

Finally, the political cost for Trump is becoming evident. A Reuters/Ipsos poll released on March 24 showed his approval rating dropping to 36%, the lowest since returning to office. Rising fuel prices and public dissatisfaction with military actions are driving the decline. Higher gasoline costs and economic concerns are amplifying public skepticism over unclear war objectives.

In the near term, oil markets and risk assets are likely to remain caught between expectations of de-escalation and the reality of continued conflict, with the Bab el-Mandeb Strait emerging as a critical new variable in global energy pricing.