Oil prices surged to $97 following an attack by Houthi rebels on two Saudi Arabian oil tankers. The incident has raised significant concerns about the stability of global oil supplies and the potential for wider regional conflict impacting vital shipping lanes.
The Houthis claimed responsibility for missile and drone strikes on the tankers, identified as the Encelia and the Layla, in the Red Sea. Saudi state news agency SPA confirmed that the Encelia was struck, causing a fire at its bow. A maritime security source further corroborated that the Encelia transmitted a distress call after being hit by a missile near the Saudi port of Jizan on July 22.
This attack marks the first direct strike on oil tankers in the Red Sea and comes after the Houthis declared a naval blockade on Saudi Arabia. Millions of barrels per day of Saudi oil, which previously transited the Strait of Hormuz, have been rerouted to the Red Sea port of Yanbu due to geopolitical tensions. If shipments are unable to pass through the Red Sea's southern strait, they would face significantly longer and costlier journeys via the Suez Canal and around the Cape of Good Hope, adding weeks to transit times and increasing freight rates.
The escalation prompted Brent crude to rise 1.4% above $95 a barrel, reaching a six-week high, while West Texas Intermediate neared $88 a barrel. The threat of a naval blockade further jeopardizes global energy markets, as any sustained disruption in the Bab al-Mandeb Strait, a critical choke point, could lead to higher energy prices for consumers worldwide.
Indeed, some tankers carrying Saudi oil bound for China and India had already made U-turns, opting for alternative routes, anticipating further restrictions. This situation highlights the increasing vulnerability of the global energy system to regional shocks, with analysts warning of higher energy consumer costs if the blockade significantly restricts trade.
