Oil Prices Rise as Houthi Attacks Heighten Saudi Supply Risks
Key Takeaways
- •Yemeni Houthi forces struck Saudi Arabia's southern Najran province, resulting in the deaths of 11 civilians according to the Saudi-led coalition.
- •Iran is weighing restrictions on U.S., Israeli, and other hostile vessels in the Strait of Hormuz, with proposed fines of 20% of cargo value for violations and passage fees of 5% to 7% for other ships.
- •A senior Saudi official warned that Houthis and Iran-linked Iraqi groups are coordinating planned attacks on Saudi civilian targets, including energy infrastructure and ports.
- •Oil prices climbed in response to the escalating conflict, with Brent crude trading at $83.80 per barrel and West Texas Intermediate at $78.33 per barrel.
- •Two Saudi tankers were struck in the Red Sea over the past week, compounding concerns about disruptions to Middle East energy exports.
The Yemeni Houthis have struck Saudi Arabia's southern province of Najran in the latest escalation of Middle East hostilities, killing 11 civilians, Reuters reported, citing a spokesman for the Saudi-led military coalition fighting the Houthis in Yemen.
The report came after news that Iran is considering a ban on U.S., Israeli and other "hostile" vessels in the Strait of Hormuz. Under the reported plan, ships that violate the ban could be fined an amount equal to 20% of the cargo's value. For other vessels, Iran would seek passage fees ranging from 5% to 7% of the cargo's value. The strait is one of the world's most critical oil chokepoints, carrying roughly a fifth of global daily oil consumption, which makes any disruption there a direct concern for energy markets worldwide.
The developments pushed oil prices higher on the day. Brent crude recovered above $80 and was trading at $83.80 per barrel at the time of writing. West Texas Intermediate also rebounded, trading at $78.33 per barrel earlier in the session.
Reuters, in its report on the Houthi attacks, cited a senior Saudi official as saying the Houthis and Iran-affiliated Iraqi groups were preparing a coordinated attack on Saudi civilian targets, including energy infrastructure and ports. That would further complicate energy export flows in the Middle East at a time when peace remains elusive. Saudi Arabia is among the world's largest oil exporters, and its energy infrastructure has been a recurring target since the Saudi-led coalition intervened in Yemen in 2015.
The Houthis are also targeting Saudi tankers in the Red Sea. Two vessels were struck over the past week, adding further support to oil prices. On Thursday, the Houthis also reported an attack on Saudi troops in Yemen, suggesting that the conflict is intensifying again.
The latest events follow comments from U.S. Treasury Secretary Scott Bessent earlier in the week, when he said a deal was within reach and that oil flows through Hormuz could resume as early as Wednesday. Instead, hostilities have escalated.
"Despite clear signs of progress in recent days, the tenor of the rhetoric and growing distrust between the US and Iran mean things could go from bad to worse once again," ING commodity analysts wrote in a note earlier today.
By Irina Slav for Oilprice.com