Crude prices extended their rally as the Middle East conflict entered a more dangerous phase, with attacks expanding beyond traditional energy assets to include shipping lanes, water infrastructure and strategic facilities, RBC Capital Markets strategists said in a note on Thursday.
RBC analysts said that Brent crude has surged over 30% since the start of July as traders increasingly price in the risk that disruptions could spread beyond the Strait of Hormuz.
Although physical oil flows have so far proven relatively resilient, the analysts said the conflict is evolving into a wider infrastructure war with the potential to remove more supply from global markets.
RBC said that the conflict is entering a critical stage, with the involvement of Yemen's Houthi militants creating fresh risks for Red Sea shipping while Iranian strikes on critical infrastructure across the Gulf raise concerns over the resilience of essential services supporting regional energy exports.
The latest escalation comes as Houthis claimed attacks on Saudi Arabia's crude tankers transiting the Red Sea, threatening one of the region's key alternative export corridors should traffic via the Hormuz remain constrained.
The Red Sea has emerged as a critical waterway as producers seek to reroute cargoes around the Gulf. However, sustained attacks could undermine the effectiveness of Saudi Arabia's East-West Pipeline, one of the few alternatives available to bypass Hormuz.
RBC said that shipping constraints would further complicate exports. Very Large Crude Carriers cannot fully transit the Suez Canal when loaded, forcing operators either to offload part of their cargo through Egypt's Sumed pipeline or rely on smaller shuttle tankers.
The research firm said that either option would increase transportation costs and could extend voyage times to Asia by about four weeks.
The attacks also challenge the assumption that global oil markets can always find alternative routes during supply disruptions, a view that has helped limit previous price spikes despite repeated geopolitical crises.
Meanwhile, RBC said that a sharp deterioration in the Black Sea security environment is creating another source of supply risk.
Ukraine has broadened attacks from Russian energy infrastructure to maritime operations, targeting vessels operating in the Black Sea and Sea of Azov.
The campaign has disrupted operations at the Caspian Pipeline Consortium's export terminal at Novorossiysk, a critical outlet for Kazakh crude.
RBC said that about 80% of Kazakhstan's oil exports move through the CPC system. With storage reportedly reaching capacity and pipeline intake curtailed, prolonged disruptions could eventually force production shut-ins from a country that pumped about 1.7 million barrels per day in June.