Brent crude futures extended rally on Wednesday gaining more than 2% as Middle East military strikes and tanker attacks effectively paralyzed traffic through the Strait of Hormuz, forcing oil markets into a supply panic.
The Brent futures surged 2.6% to $93.40 per barrel. Murban futures closed at $85.77/bbl on July 21 and were not trading by the time of publication of this oil price update.
"Crude oil prices rallied, as risks of further supply disruptions mounted," ANZ analysts noted.
Following recent attacks on vessels in the Strait of Hormuz, the narrow waterway has been deserted, with zero commercial ships transiting, analysts noted.
The prospect of a diplomatic offramp also evaporated after Iranian attacks on US military sites prompted President Trump to reportedly declare that Tehran would face severe consequences, while dismissing reports of an imminent meeting.
Compounding the crisis, Yemen's Houthi militants issued electronic warnings advising shipowners not to call at Saudi Arabian ports, threatening maritime traffic in the Red Sea and prompting at least three tankers to take U-turns in the southern Red Sea.
This directly threatens Saudi Arabia's primary alternative export lifeline. Shipments via its Red Sea Yanbu terminal had reportedly reached record levels of 5.9 million barrels per day in the week ending July 17 before slipping to 5.5 mb/d by July 20.
Adding to global supply strains, disruptions also surfaced outside the Middle East following an attack on the Caspian Pipeline Consortium terminal on Russia's Black Sea coast, which handles roughly 1.8 mb/d of Kazakh exports.
"The risks to supply sent Brent crude above $90/bbl, with further gains likely if the disruptions in the Middle East persist," ANZ analysts noted.
In response to the tightening supply crisis, India has intensified its reliance on Russian crude, with June imports topping 2.3 mb/d and holding near that pace through July despite ongoing western sanctions pressure, according to a Bloomberg report.
On the supply side, data from the American Petroleum Institute revealed Tuesday that US crude oil inventories increased by 2.603 million barrels in the week ended July 17.
The oil market now awaits the US Energy Information Administration's petroleum inventory report, scheduled for release on Wednesday.