Brent Rises Above $91 on US-Iran Strikes, Houthi Blockade Threat
Oil prices reached a five-week high as an 11th night of US strikes on Iran coincided with a Houthi threat to blockade Saudi crude shipments through the Bab el-Mandeb Strait.
Brent crude futures climbed 50 cents, or 0.55%, to trade at $91.51 a barrel on Wednesday, while US West Texas Intermediate rose 30 cents, or 0.36%, to $84.64. The early gains in thin trading pushed Tuesday's close to a five-week high, driven primarily by deepening fears over global energy supply disruptions.
The price rally followed an 11th consecutive night of US military strikes on Iranian targets, with the latest round hitting southern and western Iran late Tuesday US time. Tehran retaliated by attacking US facilities in Bahrain, Kuwait, and Jordan. Kuwait's military simultaneously reported intercepting Iranian drones over its airspace, underscoring the widening geographic scope of the conflict.
For commodities investors, the most significant development is the forced shift in Middle Eastern export routes. Strait of Hormuz shipments have declined sharply since the US-Iran ceasefire collapsed earlier this month. Consequently, Saudi Arabia has had to pivot, making the Bab el-Mandeb Strait at the southern entrance to the Red Sea a critical artery for its crude exports.
That alternative route is now facing an unprecedented threat. Yemen's Iran-backed Houthi rebels announced a naval blockade of Saudi Arabia and explicitly warned they would target ships transporting Saudi crude through the Bab el-Mandeb. Should this blockade materialize, it could effectively cut off a primary remaining export channel for the world's largest oil exporter, triggering severe supply shortages.
The surging geopolitical risk premium is colliding with mixed domestic supply signals in the United States. Data from the American Petroleum Institute indicated that US crude oil and distillate inventories increased last week, though gasoline stockpiles declined. Market participants are now awaiting the official inventory report from the US Energy Information Administration, scheduled for release on Wednesday, to determine if domestic supply buffers can absorb the overseas shocks.
The sustained military engagement is also generating substantial fiscal costs that broad market participants must track. US Defense Secretary Pete Hegseth stated that the military campaign in Iran has reached $37.5 billion in costs. This figure is nearly $8 billion higher than previous public estimates, adding a layer of fiscal pressure that could influence broader macroeconomic forecasts and defense sector allocations.
