Prediction Markets Sound the Alarm: Odds of a Bab el-Mandeb Closure Surge Amid New Blockade Threats

Chances of a naval blockade affecting the Bab el-Mandeb Strait Rise in Prediction Markets

Traders in prediction markets are now starting to evaluate the chance of a closure in the Bab el-Mandeb Strait, a main chokepoint for Saudi oil exports.

Polymarket bettors have now elevated the possibility of this happening by August 31 to 21%, rising from a low of 11% on Monday morning. Chances of it happening before September 30 also rose as high as 26%.

The catalyst that accelerated this reaction is the recent statements of the Yemeni Houthis, a group known as Ansar Allah, which declared a naval blockade against Saudi Arabia, based on the principle of an “eye for an eye.” The move is set to disrupt over 4.5 million barrels moved through the strait, putting even more pressure on international energy markets.

The group seeks to escalate the conflict against the Saudi government after an attack on the Sanaa airport last week to stop an Iranian aircraft from landing, even as the Yemeni government claimed responsibility.

“We call upon the people of our great nation to continue the general mobilisation and general call to arms, and to be fully prepared for all scenarios and developments and to support the fronts with fighters,” the Houthis stated, hinting at an increased involvement in the Middle East conflict.

What’s interesting about this contract is that it diverts from the usual “credible reports” linked resolution and links its outcome to actual data published by PortWatch, an International Monetary Fund (IMF) platform that monitors maritime trade flows.

The contract defines that it will resolve positively “if IMF PortWatch publishes a 7-day moving average of transit calls (‘Arrivals of Ships’) for the Bab el-Mandeb Strait less than or equal to 10 for any date between market creation and the listed date.” Otherwise, this market will resolve to No.