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(Bloomberg) — Oil closed in on $100 a barrel in London after Iran-backed Houthi militants said they attacked two Saudi Arabian tankers in the Red Sea, escalating the Middle East conflict and threatening deeper supply disruptions.
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The Yemen-based Houthis said they fired missiles and drones at the vessels to enforce a blockade of Saudi ports announced this week, which is spurring buyers in India and other parts of Asia to contemplate a switch to longer and potentially costlier routes via the Suez canal.
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The attacks open a new front in the months-long regional conflict, which is once again throttling tanker flows from the Persian Gulf as the ceasefire between the US and Iran collapses into a new round of hostilities.
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Targeting the Red Sea imperils the critical detour route that the Saudis used to keep barrels flowing — and limit fallout for the global economy — while the Strait of Hormuz waterway remains disrupted.
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It also comes as exports from major producer Kazakhstan are endangered by the Russia-Ukraine war, and the world’s oil inventories are depleted by months of conflict, risking a painful price spike.
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Brent futures briefly rallied above $99 a barrel, after closing at a six-week high on Wednesday, bringing their gains for the month to 36%.
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In recent days, Iran has struck vessels in Hormuz, while the US has bombarded the Islamic Republic over the past 12 days and restored a blockade of its ports. Tehran has responded by attacking US allies in the region. Some analysts see prices returning to triple digits later this year if hostilities persist.
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“Round 2 of the military conflict is going to be broader than round 1,” Bob McNally, president of Rapidan Energy Group and a former White House official, said in a Bloomberg television interview. “The risks are great, not only to shipping, but also to energy infrastructure.”
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Still, two China-owned oil tankers appeared to be undeterred by the risk, with one exiting the Red Sea’s Bab el Mandeb and another on course to follow, according to ship-tracking data.
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Washington and Tehran have both played down the prospect of peace talks, raising the possibility of prolonged hostilities that could tighten oil markets. President Donald Trump threatened to bomb bridges and power plants, and reiterated threats to strike Pickaxe Mountain, a suspected Iranian nuclear site.
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Meanwhile, Kazakhstan is being forced to stop piping crude to its main export terminal on Russia’s Black Sea coast – the Caspian Pipeline Consortium facilitiy — following a spate of drone attacks on tankers.
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—With assistance from Yasufumi Saito, Rob Verdonck and John Deane.
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English (US)