Red Sea Attacks Push Crude Above $100 as Middle East Choke Points Tighten

Dual Disruption Drives Price Surge

Brent crude settled at $100.69 per barrel on Thursday, climbing 7 percent in a single session as attacks on two Saudi oil tankers in the Red Sea added a second critical bottleneck to an already constrained global supply picture. The milestone marks the first close above $100 since late May and caps a near-40 percent rally since conflict with Iran escalated in February.

West Texas Intermediate rose 6.2 percent to $92.19, its highest settlement since early June. The twin disruptions at the Strait of Hormuz and the Bab el-Mandeb Strait now threaten shipping lanes that together handle roughly one quarter of the world's oil supply.

Yemen's Houthi forces claimed responsibility for the tanker attacks, stating they would enforce a naval blockade on Saudi Arabian shipments. Saudi state media confirmed one vessel caught fire after an assault while transiting Red Sea waters, though it did not identify the attackers. The incident opens a new front in the regional conflict, extending disruption beyond the Persian Gulf into a second strategic waterway.

Hormuz Traffic Collapses

The Strait of Hormuz has seen loading activity plummet to 2.5 million barrels per day over the past week, down from 6 million barrels daily over the preceding month, according to UBS analyst Giovanni Staunovo. Iranian strikes on non-Iranian vessels crossing the waterway, combined with a reimposed US naval blockade targeting Iranian ports, have driven the drop.

Iranian oil loadings have fallen to zero from a range of 1.5 million to 2 million barrels per day at the start of July, Staunovo noted. Iran's Revolutionary Guards declared the strait under their control and "completely closed" while US military operations continue, warning that no tanker may enter or exit without Iranian coordination.

US President Donald Trump pledged "major military punishment" for Iran and its Houthi allies, though the threat has done little to restore flows. Bob Yawger, director of energy futures at Mizuho, warned that crude is now approaching the four-year high of $126.41 as the global economy draws down inventories at an unsustainable pace.

Red Sea Blockade Adds Pressure

The Bab el-Mandeb Strait, the narrow passage between the Arabian Peninsula and the Horn of Africa, now faces similar constraints. Despite the Houthi blockade announcement, two Chinese supertankers carrying a combined 4 million barrels of Saudi crude managed to exit the Red Sea via Bab el-Mandeb on Thursday, according to shipping data. The successful transit suggests enforcement remains uneven, but the threat alone has rattled markets already on edge.

Goldman Sachs projects Brent could exceed $120 per barrel in the fourth quarter and average $100 next year if Hormuz disruption persists through 2027. The bank sees further upside if Bab el-Mandeb and the Suez Canal face sustained interference, a scenario that would leave few viable routes for Middle Eastern crude exports.

OPEC+ Weighs Emergency Response

Seven core OPEC+ members are expected to increase their collective output target by approximately 188,000 barrels per day for September when they convene on August 2, three sources familiar with the matter said. Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan, and Oman make up the group, though the ongoing conflict hampers some members' ability to ramp up production.

The modest increase reflects the cartel's limited spare capacity and the physical constraints imposed by the dual blockades. Even if production rises, getting additional barrels to market remains a logistical challenge as long as Hormuz and Bab el-Mandeb remain contested.

Supply risks are compounded by disruptions to Kazakh exports, which face threats from the Russia-Ukraine conflict. The convergence of multiple supply shocks has left the market with little buffer, amplifying price swings and raising the prospect of triple-digit oil for the remainder of the year.

Asia's Exposure

The disruptions carry particular weight for Asia, which sources the majority of its crude imports from the Middle East. China, Japan, South Korea, and India rely heavily on flows through both straits, and alternative routes via the Cape of Good Hope add weeks to transit times and significant cost.

Singapore, a regional refining and trading hub, faces heightened volatility as bunker fuel demand adjusts to rerouted shipping patterns. The city-state's small and medium enterprises in the energy sector are navigating the uncertainty with flexible sourcing strategies, though prolonged disruption would test their resilience.

Brent's gains in July alone have erased months of relative price stability, with nearly all of the 40 percent increase since February concentrated in the past three weeks. The speed of the rally has caught many market participants off guard, and the lack of clear resolution to the military standoff suggests further upside risk remains in play.