Oil Prices Surge Past $100 as Houthi Seizure of Red Sea Port Deepens Global Supply Fears

Oil prices traded sideways on Friday, putting them on course to close the week above $100 per barrel for the first time in nearly four months. This upward pressure comes as Middle Eastern supply concerns escalate following the seizure of a key port city along the Red Sea by Houthi rebels, alongside ongoing vessel attacks in the Strait of Hormuz.

Brent crude, the international benchmark, dropped 2.31 per cent to $105 a barrel at 11.16am UAE time. Meanwhile, West Texas Intermediate, the US crude gauge, traded 1.96 per cent lower at $100.5 a barrel. Prices had edged higher earlier in the morning after briefly touching $109 per barrel in the previous session before paring gains later in the day.

“Prices jumped as Houthi forces advanced towards coastal areas near the strategic Bab Al Mandeb Strait, including a push towards Mokha, raising fears of deeper disruption to Red Sea shipping,” said Soojin Kim, a Dubai-based analyst at Japanese lender MUFG. She added that the escalation compounds pressure on Gulf supplies, noting that earlier Houthi attacks forced some Saudi energy facilities to halt operations while US-Iran fighting continues to threaten tanker traffic through Hormuz.

On Thursday, Houthi rebels seized Mokha, a vital port city along the Red Sea near the Bab Al Mandeb Strait crucial for Saudi Arabia’s oil exports to Asian markets. The development has amplified concerns that the Yemen-based group could expand its influence along the strait, further tightening oil markets and driving prices upward.

Preliminary data from Kpler highlights a sharp drop in ship traffic across the Bab Al Mandeb strait on Thursday, with only 27 vessels crossing the vital chokepoint down from 32 the day before. Of those, 16 exited the Red Sea and 11 entered, including a Russia-flagged vessel carrying roughly 791,000 barrels of crude toward the Indian port of Sikka, with other tankers heading to Singapore, Bangladesh, China, and Indonesia.

Traffic through the Strait of Hormuz also remains severely constrained amid tit-for-tat attacks between the US and Iran. The US military destroyed five Iranian oil tankers earlier in the week, prompting Iran to report retaliatory strikes on 10 ships near the channel. Kpler reported that just seven vessels crossed the Strait of Hormuz on Thursday, compared to 12 on Wednesday and 18 on Tuesday, a steep decline from the more than 100 vessels that typically used the route prior to the conflict in February.

“The key question for oil markets is no longer whether Brent can break above $100. It already has,” noted Priyanka Sachdeva, an analyst at Phillip Nova. “The question now is whether the market can stabilise below $120, or whether another wave of supply disruption pushes crude into a completely new price regime.”

Global benchmark Brent crude previously touched an intraday high of $126.41 per barrel on April 30, marking a four-year high driven by the Iran war and its supply impacts. Furthermore, sharp reductions in Saudi production amid constraints on both its Gulf and Red Sea export routes continue to provide underlying support for oil prices.