Houthi Attacks Block Saudi Oil Exports, Boost Rate Hike Odds

Saudi Arabia's oil exports have been severely disrupted after Iran-backed Houthi militants attacked two Saudi tankers in the Red Sea, blocking a crucial backup route for oil shipments. The attack has raised concerns about global oil supply and has pushed Brent crude prices above $100 per barrel for the first time since late May.

The Houthis claimed responsibility for the attacks on Thursday, saying they fired ballistic missiles and drones at the vessels in retaliation for Saudi Arabia's involvement in the Yemen conflict. The two tankers, Encelia and Layla, were reportedly carrying crude oil bound for India and China, respectively.

The disruption has significant implications for global oil markets, with Brent crude prices rising 7% to $100.69 per barrel on Thursday, its highest close since late May. West Texas Intermediate (WTI) also rose, closing at $92.19 per barrel.

The Federal Reserve's July meeting is now seen as a more likely candidate for a rate hike, with CME FedWatch data showing a 36.5% probability of a 25-basis-point increase in interest rates. This represents a significant shift from just weeks ago, when a July hike was considered a remote possibility.

Research strategist Ahmad Assiri at Pepperstone described the situation as 'a worrying probability of supply interruptions in a second chokepoint.' The market is pricing in a high likelihood of supply disruptions in the Bab el-Mandeb Strait, which could further exacerbate the global oil shortage.