Oil prices climbed to their highest level in almost six weeks on Wednesday, with Brent crude briefly moving above $95 a barrel as escalating conflict between the United States and Iran raised concerns over disruptions to key Middle Eastern supply routes.
Brent crude futures rose $3.82, or 4.2%, to $94.83 a barrel at 0938 GMT after reaching an intraday high of $95.24. Both Brent and US West Texas Intermediate crude touched their highest levels since June 11.
The latest price increase came as the US military carried out a further night of attacks on Iran. Kuwait’s military also said its air defences were intercepting Iranian drones, adding to concerns about the wider regional impact of the conflict.
Markets are now watching two major shipping routes. The Strait of Hormuz, through which a significant share of global oil supplies normally passes, has already seen a sharp decline in shipping activity. At the same time, Iran-aligned Houthi forces in Yemen have threatened vessels carrying Saudi oil in the Bab el-Mandeb Strait and announced a naval blockade of Saudi Arabia.
“The energy market now has the dual-strait worry, with the Bab el-Mandeb Strait looking like it could join the Strait of Hormuz as a hot spot, as traders closely watch shipping numbers in the Red Sea,” said Tim Waterer, chief market analyst at KCM Trade.
The Bab el-Mandeb, at the southern entrance to the Red Sea, has become increasingly important for Saudi crude exports as traffic through the Strait of Hormuz has fallen since a ceasefire between Washington and Tehran collapsed earlier this month.
Three tankers carrying Saudi crude to China and India turned back in the Red Sea on Tuesday and headed towards the Suez Canal rather than continuing near the Yemeni coast, according to market reports.
The threat has prompted some Asian refiners to seek alternative routes for Saudi oil, including shipments from the Red Sea port of Yanbu through the Suez Canal and around Africa.
“The Houthi threat has led tankers to divert, which could further pressure the physical market and Saudi exports, contributing to push prices to the upside,” said Frank Walbaum, a market analyst at trading platform Naga.com.
Oil inventories have also become a focus for traders. Data from the American Petroleum Institute indicated that US crude and distillate stocks increased last week, while gasoline inventories declined.
The market was awaiting official inventory figures from the US Energy Information Administration, which were due later on Wednesday. The data could offer fresh clues about domestic demand and the balance between supply concerns caused by the conflict and actual stock levels.
