Houthi attacks on Saudi tankers push Brent crude above $100 as Bab el-Mandeb blockade tightens

Attack on tankers and price surge

Brent crude, the international benchmark, surged as much as 7.4% on Thursday to $101.01 a barrel, the first time above $100 since 26 May. West Texas Intermediate rose 3.78% to $90.11. The spike followed a Houthi claim of responsibility for strikes on two Saudi tankers, the Encelia and Layla, which the group said had violated its naval blockade. The UK Maritime Trade Operations reported that one vessel caught fire about 70 nautical miles southwest of Al Shuqaiq, with no casualties.

This is the perfect storm for the market. We have an escalation of rhetoric from both sides and now the attacks in the Red Sea. The market was probably short. Everything is moving in the wrong direction.

The attacks came hours after President Donald Trump warned the US would strike an Iranian bridge or power plant for each ship attacked in the Strait of Hormuz, signalling a further escalation after last month's ceasefire collapse.

Strategic chokepoint under threat

The Bab el-Mandeb strait, linking the Red Sea to the Gulf of Aden, has become the primary export route for Saudi crude since Iran closed the Strait of Hormuz in the early days of the war. Saudi Arabia has been shipping roughly 5 million barrels per day from its Yanbu terminal on the western coast since March, more than double pre-war levels, with about four-fifths of those volumes passing through Bab el-Mandeb, according to Kpler data.

The route between Yanbu and China is just over 20 days via Yemen, while going through the Suez Canal and around Africa means a journey of more than 50 days.

The Houthi blockade, declared on 20 July, now forces tankers to avoid the strait entirely, rerouting through the Suez Canal and around the Cape of Good Hope. Larger crude carriers cannot transit the canal fully loaded due to depth restrictions and must partially offload via a pipeline south of the canal before reloading near Alexandria, adding at least four weeks to a typical voyage.

US-Iran war of words

President Trump told Axios he was considering a "massive attack" on Iran and was "close to a decision," while warning of "severe military punishment" for both Iran and the Houthis if attacks on commercial shipping continue. Iran's Foreign Minister Abbas Araghchi said there was no prospect of progress in talks as long as Washington's stance remained unchanged, and Tehran warned it would target US-linked infrastructure and energy assets across the region if the threats were carried out.

The war, which began in February with US and Israeli strikes on Iran, entered a new phase after the June ceasefire collapsed. Iran's Revolutionary Guards reported a tanker on fire after an explosion near the coast of Oman, while two other vessels changed course. The Houthi actions also risk upending a four-year truce between the group and Saudi Arabia.

Inflation and central bank pressure

The renewed oil rally is feeding directly into consumer prices. If Brent holds near current levels, it would record a monthly gain of more than 35%, one of the three largest monthly increases in a decade. The European Central Bank warned on Thursday that "the full inflationary impact of the energy shock has not yet fully manifested" as it kept borrowing costs unchanged. Higher fuel costs are already filtering into gasoline, transport, food and airfares, squeezing households and piling political pressure on governments.

The full inflationary impact of the energy shock has not yet fully manifested.

Trump faces domestic headwinds ahead of November's midterm elections, with rising petrol prices and the ongoing war fuelling voter discontent.

Global trade rerouted

Avoiding Bab el-Mandeb more than doubles sailing time on the Yanbu-to-Asia route, from just over 20 days to more than 50 days. The logistical burden is compounded by Suez Canal draft limits, which force partial unloading and reloading of crude. The disruption is tightening the global tanker market and adding a geopolitical risk premium that analysts say is likely to persist as long as the Houthi blockade and US-Iran standoff continue.