Oil prices experienced a significant surge, with international Brent crude oil rising as much as 4.9% to over $95 per barrel, marking its first time at that level in nearly six weeks. U.S. crude oil similarly saw a nearly 5.1% increase, approaching $89 per barrel. While these prices pulled back slightly later in the day, U.S. crude closed higher by 2.9% at $86.83 per barrel, and Brent closed up 3.4% at $94.07 per barrel. This jump pushed oil prices up by 25% since the beginning of the month and over 50% since the start of the year, effectively erasing earlier drops that followed a U.S.-Iran memorandum of understanding in mid-June.
The primary drivers of this volatility are escalating geopolitical tensions in the Middle East. Houthi rebels in Yemen declared a maritime embargo against Saudi Arabia, leading to several oil tankers making U-turns in the Red Sea to avoid potential attacks. Bloomberg tracking data shows one such vessel, the Xin Long Yang, rerouted after leaving Saudi Arabia's Yanbu port. NBC News reported that four additional verified U-turns occurred near the Gulf of Aden, with ING commodities analysts noting these actions are prompting shippers to avoid the Bab el-Mandeb Strait, which would force longer, more expensive voyages via the Suez Canal. Standard Chartered analysts described this as a "two-chokepoint problem" affecting global oil markets.
Further compounding the issue are ongoing U.S. military strikes on Iranian targets and Iran's retaliatory actions for an eleventh consecutive night. These broader Middle East hostilities, coupled with the Houthi threats, have made shipping through the Red Sea increasingly risky. MarineTraffic indicated growing hesitation among vessels approaching the region. This disruption also caused Treasury yields to spike, with the U.S. 10-year Treasury yield hovering around 4.65% by midmorning trading, its highest since May, reflecting concerns about inflation fueled by rising oil prices.
