Oil prices surged by more than 6% on Thursday, with Brent crude climbing above $100 per barrel for the first time since May.
The rally followed reports that Yemen’s Iran-aligned Houthi movement had attacked two Saudi oil tankers in the Red Sea. The incidents increased fears of further disruption to Middle Eastern energy exports and drew a sharp warning from U.S. President Donald Trump.
Brent and WTI Oil Prices Surge
At 14:20 ET, September Brent crude futures jumped 7.4% to $101.08 per barrel.
Meanwhile, September West Texas Intermediate crude futures gained 6.8% to reach $92.75 per barrel.
Brent has now recovered by approximately $20 from its early-July lows as geopolitical tensions have returned to the oil market.
Iran Tensions Revive Inflation Concerns
Oil prices have climbed sharply since the breakdown of the memorandum of understanding between Washington and Tehran.
The renewed rally has brought inflation concerns back into focus. Higher crude prices can increase transportation, manufacturing and household energy costs across the global economy.
These concerns were also reflected in the U.S. bond market. The benchmark 10-year Treasury yield rose by 4.4 basis points to approximately 4.704% as traders sold government debt.
Higher bond yields suggest that investors expect inflation to remain elevated and monetary policy to stay restrictive.
Macquarie Expects Oil Supply to Remain Tight
Macquarie global energy strategist Vikas Dwivedi said crude prices could remain supported over the coming weeks.
According to Dwivedi, fewer barrels may be available from the Arabian Gulf despite sufficient near-term supply following the production increase recorded during the earlier U.S.-Iran agreement.
He also said the latest rally had been strengthened by the return of a geopolitical risk premium and a short squeeze.
Before the ceasefire collapsed, many traders had built substantial bearish positions in the oil market. The rapid shift in geopolitical conditions forced some of them to buy back those positions, adding momentum to the rally.
Macquarie currently sees a moderate possibility of further escalation but considers a return to full-scale regional conflict less likely unless either side makes a serious miscalculation.
Houthis Target Saudi Oil Tankers
The Houthis said the two Saudi tankers were targeted because they had allegedly violated a newly announced maritime blockade.
Saudi authorities had not confirmed significant damage to the vessels. However, the attacks raised fears that the conflict could spread across additional shipping routes in the Middle East.
Earlier in the week, the Houthis said they would attempt to prevent Saudi-linked vessels from travelling through the Bab el-Mandeb Strait.
The waterway connects the Red Sea with the Gulf of Aden and represents a major route for global energy shipments.
Bab el-Mandeb Becomes Critical for Saudi Exports
The Bab el-Mandeb Strait has become increasingly important for Saudi Arabia because traffic through the Strait of Hormuz remains restricted.
Saudi Arabia’s Yanbu terminal has emerged as a key alternative export hub. However, tankers departing from Yanbu must still pass through Bab el-Mandeb to reach Asian and international markets.
Ships attempting to avoid the strait would need to travel around southern Africa. That route would significantly increase journey times, fuel consumption and freight costs.
Several Saudi tankers heading toward India and China reportedly changed course following the latest Houthi threats.
Saudi Arabia’s Alternative Export Route Faces a Test
Shipping analytics company Kpler said Saudi Arabia’s export strategy is now facing a major challenge.
The country has reportedly redirected approximately 3.5 million barrels per day through Yanbu since April.
This shift has made Saudi exports increasingly dependent on the Bab el-Mandeb corridor while shipping through the Strait of Hormuz remains constrained.
Any disruption to both waterways could remove substantial volumes of oil from the global market and push prices even higher.
Trump Threatens Military Retaliation
President Trump criticized the Houthis following the attacks on the Saudi tankers.
He said the group had previously behaved responsibly during the conflict involving the United States and Iran but had now resumed attacks on commercial shipping.
Trump warned that any further incidents could result in major military action against both the Houthis and Iran.
The president described the Houthis as an Iranian proxy and said Tehran would be held responsible for additional attacks.
His comments increased concerns that the conflict could broaden further and threaten regional energy infrastructure.
U.S. Continues Military Strikes on Iran
The U.S. military completed another round of attacks against Iran, marking the twelfth consecutive night of bombardment.
The continued strikes have added further uncertainty around shipping through the Strait of Hormuz.
Iran’s Islamic Revolutionary Guard Corps reported an explosion along a mined route south of the strait. One of three oil tankers in the area reportedly caught fire, while the other two vessels turned back.
The incident highlighted the growing risks facing ships operating near one of the world’s most important energy corridors.
Iran Claims Strait of Hormuz Is Closed
Iran has continued responding to U.S. military operations.
The Revolutionary Guard claimed responsibility for attacks on American military targets in Kuwait.
Tehran also said it controlled the Strait of Hormuz and described the waterway as fully closed. Iranian authorities warned that tankers would not be allowed to pass without prior coordination.
A prolonged closure could have serious consequences because a significant share of the world’s oil and liquefied natural gas travels through the strait.
U.S. Reportedly Considers Larger Attacks
The United States is reportedly considering a new phase of military operations against Iran.
The potential plan could involve larger attacks than those previously carried out. However, no final decision has been announced, and military officials have not received new orders.
Trump said Iran remained interested in an agreement but was not yet prepared to accept acceptable terms.
His comments suggested that diplomacy remained possible, although the military confrontation continued to intensify.
Oil Market Faces Growing Supply Risks
The attacks on Saudi tankers have expanded concerns beyond the Strait of Hormuz.
With both Hormuz and Bab el-Mandeb facing security threats, traders are pricing in a greater risk of disruption to Middle Eastern oil supplies.
Higher freight costs, longer shipping routes and reduced tanker traffic could keep Brent crude above $100 if tensions continue.
For now, oil prices are likely to remain sensitive to military developments, shipping activity and any signs that the United States and Iran may return to negotiations.
