Oil reaches five-week high on Middle East strikes and Houthi blockade threat
Crude futures surged to their highest levels in five weeks as escalating military strikes between the United States and Iran, combined with a threatened Houthi naval blockade, inject severe supply disruption risks into global energy markets.
Brent crude futures advanced $2.12, or 2.4 percent, to trade at $91.34 a barrel by mid-morning in New York. U.S. West Texas Intermediate crude gained $1.80, or 2.2 percent, to reach $85.03. Both benchmarks are on track to post their highest closing prices since early June, with Brent registering overbought technical signals for a seventh consecutive session.
The price surge follows an overnight escalation in regional hostilities. U.S. forces struck military targets in southern and western Iran, prompting retaliatory attacks by Tehran on American installations in Bahrain, Kuwait, and Jordan. At least one vessel was also struck in the Strait of Hormuz during the crossfire.
Compounding the geopolitical tension, Yemen’s Iran-aligned Houthi movement announced a naval blockade targeting Saudi Arabia on Monday. The threat immediately disrupted maritime traffic, forcing two tankers loaded with Saudi crude destined for China and India to reverse course in the Red Sea. Shipping data indicates the vessels are now redirecting toward the Suez Canal, though the Saudi port of Yanbu continues normal operations.
Market participants are weighing the potential for prolonged supply constraints across multiple critical export routes. Tim Waterer of KCM Trade noted that the Houthi blockade threats are significant because they elevate the risk of disrupting another major oil exporter. Meanwhile, Asian fuel oil markets extended their recent gains in response to the Red Sea gateway risks.
Analysts at SEB Research suggested the recent American military strikes could be a final effort to improve negotiating leverage before a compromise reopens the Strait of Hormuz. "The optimist may see the latest American attacks as a last attempt to strengthen the negotiating position before a compromise is reached and the Strait of Hormuz is reopened," the firm noted, adding that "the risk is a more prolonged stalemate, with continued uncertain energy flows, higher oil prices and recurring attacks."
This geopolitical friction arrives as Saudi Arabian crude exports already face downward pressure, having fallen for a third consecutive month in May to a record low according to the Joint Organizations Data Initiative. Investors are now turning their attention to domestic U.S. storage data, with analysts projecting a 0.5 million barrel crude drawdown for the week ending July 17. The American Petroleum Institute will release its weekly report later Tuesday, followed by the Energy Information Administration on Wednesday.
