The escalation has also pushed up wholesale natural gas prices in Europe. The benchmark UK gas price has climbed to around 150 pence per therm, compared with about 98p at the end of June.
Global oil prices have hit $100 a barrel for the first time since May as renewed fighting in West Asia and fresh attacks on shipping routes have heightened fears of disruptions to global energy supplies. Brent Crude, the international benchmark, rose more than 6% on Thursday to 100.40 dollars per barrel, whereas WTI crude stood at 91.76 dollars per barrel as per data from oilprice.com, a global oil price monitor.
The prices surge after a brief period of easing in oil markets following a temporary ceasefire between the United States and Iran. Prices had reached levels seen before the latest phase of military action in late February. However, the breakdown of the ceasefire and renewed hostilities have once again rattled energy markets. US Secretary of State Marco Rubio this week said Iran’s leadership was “not ready to make a deal”, adding to concerns that the conflict could persist.
Wholesale natural gas prices in Europe have also surged due to the escalation.
Why are oil prices rising?
The immediate trigger for the latest surge was a series of attacks by Yemen’s Iran-backed Houthis group on Saudi oil tankers in the Bab al-Mandab Strait, a strategic maritime chokepoint linking the Red Sea with the Gulf of Aden.
The Houthis had earlier warned shipping companies against loading or unloading cargo at Saudi ports, threatening to target vessels that ignored the warning. The group later claimed at least six ships had altered their routes following the warning.
Why is Bab al-Mandab important?
The Bab al-Mandab Strait, located between the Arabian Peninsula and the Horn of Africa, has become increasingly important for global oil trade during the ongoing conflict.
Historically, the route handled about 4.1 million barrels of crude oil and refined petroleum products a day, roughly 5% of global seaborne oil flows. While this is significantly lower than the roughly 20% of global oil supplies that normally transit the Strait of Hormuz, its strategic importance has grown as exporters have sought alternatives to Hormuz amid regional tensions.
In recent months, Saudi Arabia has increasingly relied on its East-West Pipeline, transporting crude from the Abqaiq processing facilities to the Yanbu export terminal on the Red Sea coast. This has enabled a substantial share of the kingdom’s exports to bypass the Strait of Hormuz and reach international markets via the Red Sea.
As Houthi attacks threatens shipping through Bab al-Mandab as well, traders fear disruptions across two of the world’s most important energy chokepoints simultaneously.
