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US Oil Update: Crude Rally Intensifies Amid Strait of Hormuz Closure, Red Sea Threats

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Crude oil benchmarks hit their highest since June 11 on Wednesday as mounting Middle East military tensions, deserted shipping lanes in the Strait of Hormuz, and Houthi threats in the Red Sea sparked severe supply panic.

Brent futures surged 2.9% to $93.58 per barrel and hit $95.47/bbl earlier in the day. West Texas Intermediate futures gained 2.4% to $86.43/bbl.

Analysts at ANZ noted that the rally was fueled by mounting risks of prolonged supply disruptions across vital energy corridors. Following recent attacks on commercial vessels no ships have been observed transiting the crucial waterway recently.

Meanwhile, prospects for a diplomatic resolution evaporated after Iranian attacks on US military sites prompted President Donald Trump to warn of severe consequences while dismissing reports of an imminent meeting.

The crisis deepened as Yemen's Houthi militants reportedly issued warnings cautioning shipowners against calling at Saudi Arabian ports, prompting at least three tankers to execute u-turns in the southern Red Sea.

"Factoring in the renewed disruptions from the Persian Gulf, risks to Saudi crude exports from the Red Sea, and developments in the Black Sea, one may argue that Brent at just over $91/bbl is undervalued. Particularly if these disruptions persist into August," ING analysts noted.

Compounding supply pressures, disruption also emerged outside the Middle East following an attack on the Caspian Pipeline Consortium terminal on Russia's Black Sea coast, which handles about 1.8 mb/d of Kazakh exports.

The market now awaits official confirmation from the US Energy Information Administration's upcoming petroleum inventory report.

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US Oil Update: Crude Advances as Middle East Conflict Fuels Supply Risk Concerns

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Oil & Energy

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