Yemen's Houthi militants have seized two strategic Red Sea islands, reinforcing their control over a key shipping route as concerns mount over a new oil supply crisis. The capture of Greater and Lesser Hanish follows the group's swift advance along Yemen's coast, including the port of Mokha and Perim island in the Bab al-Mandab strait. The islands lie 160km north of the strait, a chokepoint connecting the Red Sea to open ocean and Saudi Arabia's Asian markets.

The Houthi advance has left Yemen's Saudi-backed government scrambling to regain territory, while Riyadh faces attacks on a critical oil pipeline by Iran-allied militants in Iraq. Air alerts flash daily across Saudi Arabia, and ballistic missile and drone attacks wounded 13 civilians on Monday. Nearly 94,000 Yemenis have fled since fighting escalated this month, the International Organization for Migration said. About 200 schools have been converted to shelters. More than 2,000 people have fled across the sea into Djibouti.

Experts warn the closure of Saudi Arabia's east-west pipeline will pressure global oil supplies. "Any prolonged disruption and the associated supply loss could easily push prices to the next level higher," said Tim Waterer of KCM Trade. Rystad Energy's Janiv Shah noted 2.6m to 4m barrels a day are now at risk of "disappearing from the market." Brent crude rose 1.17% to $106.92 a barrel on Tuesday. US diesel hit $6 per gallon for the first time.

Chevron CEO Mike Wirth said stock buffers have been "played out." "It's harder to envision a scenario where prices soften and quickly," he said. "I think the risks remain to the upside over the next few months."