Oil prices climbed to a six-week high on Wednesday as a Houthi naval blockade threat against Saudi Arabia introduced risk at the Bab el-Mandeb shipping chokepoint. Brent crude futures rose 4.2% to $94.83 a barrel at 09:38 GMT after touching a session high of $95.24, while West Texas Intermediate gained 4.33% to $87.99, according to Reuters. Both benchmarks reached their highest levels since 11 June. The price surge followed three tankers carrying Saudi crude for China and India making U-turns in the Red Sea on Tuesday, combined with US officials narrowing prospects for fresh ceasefire talks after stating Tehran was not serious about negotiating. The market is pricing dual-strait risk, with Bab el-Mandeb now serving as the primary export route after Hormuz traffic reduced sharply since the ceasefire collapse this month.
Brent and WTI Reach Six-Week Highs on Wednesday
Brent crude futures rose 4.2% to $94.83 a barrel at 09:38 GMT on Wednesday, touching a session high of $95.24, according to Reuters data. West Texas Intermediate gained 4.33% to $87.99. By press time, Brent had eased to $93.92, up 3.20% on the day, per OilPrice.com data. Both benchmarks reached their highest levels since 11 June.
The US military carried out an eleventh consecutive night of strikes on Iran. Oil has absorbed more than a week of these strikes without a breakout. Brent briefly traded above $90 on Monday when the blockade was first declared, then retreated to around $88 as traders weighed a reported ten-day ceasefire proposal. The price broke to a six-week high as talks prospects narrowed.
Houthis Declare Maritime Embargo on 20 July
The Houthis declared a maritime embargo on Saudi Arabia on 20 July, framing it as retaliation. The group has emailed global shipping companies warning against loading cargo at Saudi ports. Iran had previously instructed the group to prepare to close Bab el-Mandeb if US strikes on Iranian power infrastructure continued.
Three tankers carrying Saudi crude for China and India made U-turns in the Red Sea on Tuesday and headed for the Suez Canal instead. MarineTraffic data cited by NBC News showed 73 vessels transiting Bab el-Mandeb on Tuesday, only slightly below Monday's count. The strait remained open with traffic broadly holding. A full closure would disrupt shipments equivalent to roughly 7% of global oil supply, per Reuters estimates.
Shipping firms operating around Hormuz have already been targeted by criminals demanding crypto payments for "safe passage", according to the source.
Yanbu Port Handles Near-Record Loadings Since June
Saudi Arabia has been routing crude to its Red Sea port of Yanbu through the East-West pipeline since Hormuz traffic reduced sharply. Yanbu loadings reached roughly 4.7 million barrels per day around 13 July and have averaged above 4 million bpd since June, against about 973,000 bpd in the same period last year. That represents close to a fivefold increase, putting the port near its practical ceiling.
Tim Waterer, chief market analyst at KCM Trade, described the market as facing a dual-strait worry, with traders watching Red Sea shipping counts as closely as Gulf ones. Saudi Arabia suspended crude shipments through Bab el-Mandeb in August 2018 after Houthi attacks damaged two tankers, then resumed within weeks.
US Strategic Petroleum Reserve Drops to 43-Year Low
An API report showed the US Strategic Petroleum Reserve down another 5.1 million barrels to 316.5 million, the lowest in more than 43 years. The market repriced when diplomacy faded, not when the blockade was announced.
FAQ
What caused oil prices to reach a six-week high on Wednesday?
Oil prices climbed to a six-week high on Wednesday due to a Houthi naval blockade threat against Saudi Arabia at the Bab el-Mandeb strait, combined with US officials narrowing prospects for ceasefire talks. Brent crude rose 4.2% to $94.83 a barrel, touching a session high of $95.24, while WTI gained 4.33% to $87.99.
When did the Houthis declare the maritime embargo on Saudi Arabia?
The Houthis declared a maritime embargo on Saudi Arabia on 20 July, framing it as retaliation. The group emailed global shipping companies warning against loading cargo at Saudi ports. Three tankers carrying Saudi crude made U-turns in the Red Sea on Tuesday.
How much oil does Saudi Arabia's Yanbu port handle currently?
Yanbu port loadings reached roughly 4.7 million barrels per day around 13 July and have averaged above 4 million bpd since June, against about 973,000 bpd in the same period last year. This represents close to a fivefold increase, putting the port near its practical capacity ceiling.
