Oil price passes $100 a barrel again as Middle East conflict escalates

Oil prices have surpassed $100 a barrel for the first time in two months due to escalating Middle East conflict. The benchmark oil price surged sharply on Thursday, following fears that Yemen's Houthi militia could disrupt Saudi oil exports via the Red Sea. These concerns are amplified by intensifying US-Iran tensions regarding oil flows through the Strait of Hormuz. The Houthis claimed responsibility for attacking two Saudi Arabian oil tankers, the Encelia and Layla, alleging violations of a naval blockade. This escalation follows the breakdown of a US-Iran memorandum of understanding and renewed hostilities in the Gulf, leading to a price climb after a period of decline.

The Iranian-aligned Houthis claimed responsibility on Thursday for strikes on two Saudi oil tankers, asserting a naval blockade on Saudi Arabia. This action, occurring near the Bab el-Mandeb Strait, raises concerns about a potential second chokehold on global oil supplies, potentially in coordination with Iran's efforts regarding the Strait of Hormuz. The Houthis stated their blockade began on Monday. Concurrently, the US military reported launching a new round of strikes on Iran on Wednesday, directed by President Donald Trump, marking the twelfth consecutive night of American attacks. Analysts suggest the Houthi blockade could be a strategic move by Iran to gain leverage in diplomatic efforts to end the war.

Secretary of State Marco Rubio accused Iran of flying members of its Islamic Revolutionary Guard Corps into Yemen, stating these actions contributed to renewed conflict between Saudi Arabia and Houthi rebels. Rubio made these remarks in Manila at an ASEAN foreign ministers' gathering, where threats to international shipping were a key concern. The Houthis have declared a blockade targeting Saudi-linked vessels in the Bab el-Mandeb Strait, which connects the Red Sea to the Gulf of Aden and is a critical global trade route. The rebels claim this is retaliation for Saudi restrictions and a recent airport attack, which Rubio disputed, alleging Iran's direct flights of IRGC personnel. The U.S. is monitoring the situation closely, as disruptions to this waterway would be problematic.

Norway's state oil company, Equinor, reported its profits nearly doubled to $11.5 billion in the second quarter of the year. This surge in earnings was driven by increased oil and gas prices, which rose due to heightened geopolitical tensions and disruptions to shipping through the Strait of Hormuz. Equinor benefited from a decision to boost its own production, filling a market gap as Gulf oil flows slumped. The company's president and CEO stated that strong production allowed them to capitalize on higher prices, contributing to robust financial results. These profits exceeded analyst predictions and represent a significant increase from the same period last year.

Iran-aligned Houthi militants have threatened to impose a naval blockade on Saudi Arabia, potentially disrupting a second major maritime chokepoint for Asian oil buyers. This threat comes as shipments through the Strait of Hormuz are already impacted by the US-Iran conflict. Analysts warn that a significant disruption in the Bab el-Mandeb Strait could limit Asian alternatives for Middle Eastern crude, threatening Saudi shipments and potentially driving oil prices above $100 per barrel. The Houthis stated the blockade threat is retaliation for Saudi Arabia's alleged 12-year restrictions on goods and resources in Yemen. A full closure of the Bab el-Mandeb Strait could disrupt approximately 7.4 million barrels of petroleum per day, representing about 7% of global oil output.

Yemen's Houthis have announced a blockade of Saudi ports, causing two tankers carrying Saudi crude to Asia to reverse course in the Red Sea. This action threatens approximately 6 million barrels of crude oil per day destined for Asia that normally pass through the Bab al-Mandeb strait. Saudi Arabia had previously rerouted oil through pipelines to its Red Sea port of Yanbu to bypass disruptions in the Strait of Hormuz. However, with Bab al-Mandeb now under threat, Asian refiners face the prospect of a significantly longer and more expensive diversion around Africa. This situation raises concerns about potential global oil supply disruptions and price spikes.

Saudi Arabia has exercised strategic patience in response to Houthi provocations, which are described as Iran's latest attempt to test Riyadh's resolve through a proxy. Iran aims to disrupt Saudi Arabia's economic transformation and regional standing by threatening maritime shipping in key waterways. The article suggests that Saudi Arabia's military capabilities have significantly evolved over the past decade, becoming a more integrated and sophisticated force. Recent Saudi actions, such as striking Sana'a International Airport, are presented as efforts to prevent Iran from establishing logistical corridors for advanced proxy operations. The Saudi-led Joint Forces Command is highlighted as a mature, multi-domain force capable of synchronized operations and escalation control, suggesting that Iran's calculations may be based on outdated assumptions about Saudi military strength.