Oil settles over $100 as Houthi attacks intensify Middle East supply risks

Oil prices surged past $100 a barrel on Thursday, marking their highest settlement since May, as Yemen's Houthi rebels escalated attacks on Saudi oil tankers in the Red Sea. This development intensifies global supply concerns, adding to existing disruptions in trade through the Strait of Hormuz.

Brent crude futures climbed $6.62, or 7%, to settle at $100.69 a barrel. The benchmark's price has risen nearly 40% since the conflict in Iran began in February, with most of that increase occurring in July. U.S. West Texas Intermediate crude also saw a significant jump, closing up $5.36, or 6.2%, at $92.19 a barrel.

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With the possibility of a ground war seemingly increasing by the day, and tanker traffic restricted through two of the most active chokepoints in the world, crude oil is suddenly positioning itself to within striking distance of the four-year high of $126.41, with the global economy drawing down so fast it will eventually be running on fumes.

Bob Yawger, director of energy futures at Mizuho, noted the increasing possibility of a ground war and restricted tanker traffic through critical chokepoints. He suggested crude oil prices could approach a four-year high of $126.41. The Houthi militia claimed responsibility for attacking two Saudi Arabian oil tankers in the Bab el-Mandeb Strait, an action Saudi state news agency SPA confirmed, stating one vessel caught fire.

Analysts at Gelber and Associates warned that the escalation compounds the near-halt in Hormuz traffic and reduced Iranian exports, intensifying worries about near-term global availability. The Strait of Hormuz and Bab el-Mandeb together handle approximately a quarter of the world's oil supply. Despite the attacks, two Chinese supertankers carrying a substantial amount of Saudi oil successfully exited the Red Sea. Goldman Sachs forecasts Brent could exceed $120 in the fourth quarter if the strait remains disrupted through 2027.

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The escalation compounds the near-halt in Hormuz traffic and the sharp reduction in Iranian exports, intensifying concerns over near-term global availability.