Brent crude $100 level breached as Middle East fighting hits oil routes
Brent crude rose above $100 for the first time since May as Houthi attacks and Iran-US fighting threatened key shipping lanes.
By James Whitfield · Staff Writer
3 min read
Brent crude crossed the $100 mark on Thursday for the first time since May, as widening Middle East conflicts threatened major routes used to move oil from the region. AFP and Reuters reported that the benchmark price reached its highest level in nearly two months and rose for a fifth straight day.
The latest move followed a claim by Yemen’s Houthis that they had hit Saudi Arabian oil tankers in the Red Sea. The attacks added pressure to a market already unsettled by renewed fighting between Iran and the United States around the Strait of Hormuz.
Why did Brent crude top $100?
Oil traders reacted to the risk that more shipping lanes could be disrupted at the same time. The Red Sea is a strategic passage for Middle East crude shipments, while the Strait of Hormuz, a critical route for global energy cargoes, remains effectively shut, according to AFP and Reuters.
The Houthis said Thursday that they attacked two Saudi Arabian oil tankers. A Saudi news agency later confirmed that one of the vessels was on fire after an assault while it was sailing in the Red Sea.
The Yemeni group had warned it would impose a naval blockade on shipments from Saudi Arabia, and its latest operation targeted vessels carrying Saudi oil through the Bab al-Mandeb strait, AFP and Reuters reported. That raised concern that the conflict could widen beyond the Iran-US fighting around Hormuz.
US President Donald Trump has warned the Houthis of “major military punishment” if they keep attacking ships.
What are traders worried about?
Analysts said higher crude prices could feed inflation and increase the chance of interest-rate rises, weighing on market sentiment. Susannah Streeter, chief investment strategist at Wealth Club, said investors were cautious as worries about the energy squeeze returned.
Streeter said pressure on both the Strait of Hormuz and the Red Sea had left markets preparing for possible disruption to vital energy routes, a risk that could keep oil prices high.
A ceasefire between Iran and the US agreed in mid-June has largely broken down, according to AFP and Reuters. The US military carried out new strikes on Iranian military targets for a 12th consecutive night, while Iran continued firing at US allies and military assets across the region on Thursday.
Iran’s Islamic Revolutionary Guard Corps said it controls the Strait of Hormuz and that the waterway is “completely closed.” The IRGC also said no tanker would be allowed to enter or leave without coordination with Iran.
How high could oil prices go?
Goldman Sachs said Brent crude could rise above $120 a barrel in the fourth quarter if disruption at the Strait of Hormuz continues into next year. Under that scenario, the bank said Brent could average $100 next year, with tensions around the Bab el-Mandeb Strait and the Suez Canal adding to the pressure.
Goldman also said it expects oil to hold most of its recent gains through July and August. The bank cited falling global inventories, reduced Middle East production, summer travel demand and a sharp slowdown in releases from strategic petroleum reserves.
This story draws on original reporting from Al Jazeera.