Brent tops $100 a barrel for first time since July 24

US, Iran trade retaliatory strikes across land and sea in Strait of Hormuz

Saudi Arabia, Houthi rebels clash anew in Red Sea, stoking fears of 'two wars'

As tensions between the US military and Iran escalate, the US military said Tuesday (local time) that it had destroyed five Iranian oil tankers in response to Iran's attack on a US Navy warship. That day, Saudi Arabia was locked in fierce fighting with Yemen's pro-Iran Houthi rebels for control of the Bab-el-Mandeb Strait at the entrance to the Red Sea. The red circle in the photo marks a US missile flying toward an Iranian oil tanker. [CENTCOM via X]
As tensions between the US military and Iran escalate, the US military said Tuesday (local time) that it had destroyed five Iranian oil tankers in response to Iran's attack on a US Navy warship. That day, Saudi Arabia was locked in fierce fighting with Yemen's pro-Iran Houthi rebels for control of the Bab-el-Mandeb Strait at the entrance to the Red Sea. The red circle in the photo marks a US missile flying toward an Iranian oil tanker. [CENTCOM via X]

Brent crude, the global oil price benchmark, touched $100 a barrel on Wednesday amid escalating tensions across the Middle East. International oil prices climbed back above the $100 mark as the United States and Iran traded retaliatory strikes across the Strait of Hormuz. Fighting also intensified between Saudi Arabia and Yemen's Houthi rebels in the Red Sea. Analysts said the simultaneous rise in military tension along the Middle East's two key oil transport routes has fed fears of supply disruptions, which are now being priced into crude.

According to Bloomberg, November-delivery Brent crude futures traded at $100.02 a barrel on the ICE Futures Europe exchange in London as of 4:20 p.m. Korean Standard Time Wednesday. That was up 2.1 percent, or $2.10, from the previous close. It was the first time Brent futures topped $100 a barrel since July 24.

Brent had already climbed as high as $99.46 a barrel during trading Tuesday, edging close to the $100 threshold. It later gave back some of the gains to close at $97.92, but jumped again just a day later as armed conflict spread across the Middle East.

Analysts attribute the price surge to "two wars" unfolding simultaneously in the Middle East. In the Strait of Hormuz, the United States and Iran are locked in a cycle of retaliation and counter-retaliation spanning both sea and land. In the Red Sea, Saudi Arabia and the pro-Iran Houthi rebels have abandoned a truce that had held for roughly four years and are expanding their clashes.

Iran's Islamic Revolutionary Guard Corps (IRGC) said in a statement Tuesday that it struck a US military base in Al-Azraq, Jordan, with ballistic missiles. Jordan's military confirmed that Iran fired 20 ballistic missiles into its territory and said it intercepted most of them.

Houthi rebels bombard Saudi military equipment with a missile. [UPI]
Houthi rebels bombard Saudi military equipment with a missile. [UPI]

The IRGC also claimed it struck the Aegis-equipped US Navy destroyers DDG-119 and DDG-53 with missiles. It said it attacked 10 vessels in the Strait of Hormuz in total, including two US ships and eight oil tankers. The US, however, maintained that Iran's attacks caused no substantial damage.

Iran's attacks came in retaliation for the US military's destruction of five Iranian oil tankers. US Central Command (CENTCOM), which oversees US military operations against Iran, said Tuesday that the tanker strikes were "a response to the IRGC's two ballistic missile attacks on US Navy vessels over the past two days."

As the clashes increasingly target oil transport vessels directly, concerns are mounting over disruptions to energy supplies passing through the Strait of Hormuz. The strait is a critical chokepoint for global crude oil and LNG shipments. Further disruptions to shipping traffic could push the geopolitical risk premium on oil prices even higher.

The situation in the Red Sea is no less alarming. The Houthi rebels have used drones and ballistic missiles to attack cities in southern Saudi Arabia and energy facilities there. As Saudi Arabia has responded in kind, observers say the long-standing truce regime is, in effect, collapsing.

The Red Sea is a key maritime logistics corridor connected to the Suez Canal. If instability spreads to the Red Sea route on top of the Strait of Hormuz, both shipping freight rates and insurance premiums could rise along with crude supply concerns. Some analysts warn that higher oil prices could in turn push up logistics and production costs, reigniting global inflationary pressure.

Markets expect international oil prices to swing sharply for now, tracking the intensity of military conflict in the Middle East. With no diplomatic breakthrough in sight between the United States and Iran, analysts say it is difficult to rule out further gains for Brent above $100 a barrel. That is especially true if attacks on oil tankers and refining facilities continue.


attom@heraldcorp.com