Oil hits five-week high as Middle East supply fears deepen
WTI closed at US$84.91 and Brent at US$91.01 as US-Iran attacks and a Houthi threat against Saudi shipping intensified supply fears
Global oil prices climbed about 2% to their highest closing levels in five weeks on Tuesday (July 21), as escalating conflict in the Middle East intensified concerns over possible disruption to major energy supply routes.
Brent crude futures for September delivery rose US$1.79, or 2.01%, to settle at US$91.01 a barrel. US West Texas Intermediate crude gained US$1.68, or 2.02%, to close at US$84.91 a barrel.
The settlement marked Brent’s highest close since June 10 and WTI’s strongest finish since June 11, as traders assessed the combined risks from continued US-Iran attacks and a threatened maritime blockade against Saudi Arabia by Yemen’s Iran-aligned Houthi movement.
Houthi threat raises Red Sea shipping fears
The Houthis declared an immediate maritime blockade targeting Saudi-linked shipping through the Bab el-Mandeb Strait, the southern gateway to the Red Sea.
The announcement raised fears that the conflict could disrupt another strategic trade route at a time when shipping through the wider region was already under pressure. The group said the measure was a response to what it described as a Saudi blockade of Yemen.
The threat applies to vessels carrying Saudi exports through the strait, potentially affecting shipments moving between the Red Sea, the Gulf of Aden and key Asian markets.
Saudi oil tankers change course
Shipping data from LSEG showed that two tankers carrying Saudi crude to China and India reversed course and headed towards the Suez Canal after the Houthi warning.
The diversions added to market concerns that Saudi exports to Asia and transit through the southern Red Sea could face further instability.
Saudi crude exports had already fallen to a record low in May, according to data from the Joint Organisations Data Initiative, marking a third consecutive monthly decline.
US and Iran continue attacks
The rise in oil prices also followed further exchanges of fire between the United States and Iran.
US forces struck targets in southern and western Iran, while Tehran launched attacks against US bases and facilities in Bahrain, Kuwait and Jordan, adding to concerns about energy infrastructure and shipping across the region.
The continuing attacks have increased the risk premium attached to oil, with markets increasingly focused on whether instability could affect Saudi exports, Red Sea traffic or other critical regional supply routes.
Kazakh oil shipments face disruption
Supply concerns extended beyond the Middle East after oil shipments from Kazakhstan through the Caspian Pipeline Consortium system were halted.
The disruption followed an attack on tankers at a Black Sea loading terminal on Monday, which interrupted loading operations. Russia accused Ukraine of carrying out the attack.
The development added another potential constraint to global supply as the war between Russia and Ukraine continued to affect energy infrastructure beyond Ukraine’s borders.
Traders await US inventory figures
Investors are now watching the latest US crude inventory report from the Energy Information Administration.
Analysts expect commercial crude stocks to have fallen by about 500,000 barrels during the week ending July 17, which would indicate a further tightening of available supplies.
