Oil Prices Soar on Houthi Attacks and Iran's Economic Threat

Oil prices surged to multi-week highs on Tuesday after Iran-backed Houthi attacks on Saudi energy facilities and Tehran's threat of 'economic warfare' against the United States. Brent crude futures rose by $2.00, or 2.06%, to $99.00 a barrel, while U.S. West Texas Intermediate (WTI) crude reached $94.41 a barrel, up $2.93, or 3.2%. The attacks halted operations at some energy facilities in Saudi Arabia, the world's top oil exporter.

Tanker flows through the Strait of Hormuz remain below normal, contributing to 'genuine physical tightness' and adding to the geopolitical risk premium, according to Tim Waterer, chief market analyst at KCM Trade. The conflict has already had a significant impact on global oil supplies, with the Strait handling about one-fifth of daily oil and liquefied natural gas shipments before the war began.

Analysts expect oil prices to remain elevated while the Strait remains contested, with Goldman Sachs raising its Brent and WTI price forecasts by $5 to $85 and $80, respectively, for December 2026. The bank also expects disruptions in Middle East shipping to continue into 2027, affecting global diesel supply due to a lack of spare refining capacity.

Goldman Sachs has forecasted that oil prices will remain high until late Q1 or early Q2 2027, while Daniel Hynes, an analyst at ANZ, said the full return to pre-war throughput is unlikely before then. The ongoing conflict and shipping disruptions have added a significant geopolitical risk premium to oil prices.