Somalia closes Bab al-Mandeb Strait to Israeli shipping, escalating tensions

Somalia’s decision to close the Bab al-Mandeb Strait to Israeli shipping has pushed the market for the strait being effectively closed by May 31 to 18% YES, up from 15% a week ago.

The May 31 market has seen the most action, with a 5-point drop earlier that is now rebounding. Closure odds for April 30 sit at 4.5% YES. The 14-point gap between the April 30 and May 31 contracts suggests traders expect a specific catalyst in May. Somalia’s move is diplomatic for now, but it could escalate tensions along one of the world’s busiest shipping chokepoints.

The May 31 market is trading $7,894 in USDC daily, while April 30 sees $3,721. Only $384 is needed to move the May price by 5 points, so this market is thinner than it appears. A single large order could swing it significantly. The largest recent move was a 5-point drop in the May market.

For traders, the Somali-Israeli diplomatic dispute raises the risk of broader shipping disruption. Buying YES at 18¢ offers a 5.56x return if the strait closes. But that bet requires a significant escalation within 31 days.

Watch for announcements from major shipping companies like Maersk or geopolitical moves from regional players like Saudi Arabia. Any confirmation of increased military activity in the strait could move this market fast.

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