Oil Prices Surge Amid Red Sea Attacks

Oil prices have surged past $90 per barrel on the US WTI crude futures market for the first time since early June, amid concerns over attacks in the Red Sea. The international benchmark Brent price briefly crossed $97, heading back towards the critical $100 mark.

The uptick in prices was driven by reports of two Saudi Arabian oil tankers being attacked in the Red Sea by the Houthi militant group, which is backed by Iran. This has raised concerns that traffic through the Red Sea could collapse, similar to what happened in the Strait of Hormuz.

According to data from JPMorgan and Goldman Sachs, the Bab el-Mandeb Strait, which connects the Red Sea to the Gulf of Aden, has been responsible for around 9 million barrels per day of crude oil flows over the past month. However, if this strait is cut off, the only other option would be to go north through the Suez Canal and the adjacent SUMED pipeline.

President Trump has stated that the US will 'hold Iran responsible' for the attacks, and that major military punishment will be inflicted upon Iran and the Houthi group. The conflict on both fronts has resulted in a decline in traffic through both straits, with crossings through the Strait of Hormuz falling 31% day-on-day as of Tuesday.

Rystad Energy's head of geopolitical analysis Jorge León has stated that their base case remains a narrow deal between the US and Iran, which would restore trade without resolving the underlying nuclear and maritime disputes. However, if fighting continues and traffic through the straits remains unable to recover, prices could climb towards $150 by September.