Crude oil futures jumped over 6% in midday trading on Thursday as the US-Iran conflict raised the risk of prolonged disruptions to crude flows, with attacks on shipping around key waterways adding to concerns that supplies will remain constrained.
Front-month West Texas Intermediate futures rallied 6.2% to $101.96 per barrel, while Brent futures surged 6.2% to $107.46/bbl.
Gelber & Associates strategists said that the prospect of simultaneous pressure on both export corridors is raising shipping risk and reducing confidence that rerouting can offset constrained Gulf traffic.
US commercial crude oil inventories decreased by 400,000 barrels to 424.1 mmbbls in the week ended Sep. 4, the Energy Information Administration said in its weekly report released Thursday.
Crude inventories matched the five-year average for this time of year, the EIA said. The draw is significantly below Investing.com's estimate of 1.4 million barrels for the week ended Sept. 4.
Yemen's Houthis reportedly seized control of the port city of Mocha on Thursday and advanced down the Red Sea coast to strategic islands, posing a further threat to Red Sea traffic, as traffic via the Hormuz remains restricted as tanker attacks in the region have intensified.
The developments come days after the militant group targeted energy facilities in Saudi Arabia. On Tuesday, Saudi Arabia's Foreign Affairs Ministry said Yemen's Houthis targeted civilian and economic assets in the cities of Abha, Khamis Mushait, Jazan and Najran.
However, a Houthi spokesperson has said that shipping flow via the Bab el-Mandeb is "safe and orderly" in an X post on Thursday.
"As for the freedom of navigation and international trade movement in the Red Sea and Bab el-Mandab, it is safe and orderly, and there is no cause for any international concern regarding it, for it faces no danger from Yemen's side, and the operations currently underway are targeted in accordance with what was previously announced and fall within a defensive framework," according to a translated post by Houthi spokesperson Mohammad Abdul Salam.
On Wednesday, President Trump said that the US may hit Iran's Pickaxe Mountain, located near its heavily damaged Natanz uranium enrichment facility, warning that the Iranian conflict would likely last beyond the November midterm elections.
Fueling bullish sentiment, the US military destroyed five Iranian crude oil tankers in retaliation for Tehran's attempted attacks on an American warship. The US Central Command said it had redirected 96 commercial vessels to ensure compliance as of Sep. 10.
Iran, in response, targeted two US warships and eight oil tankers in the Persian Gulf, marking the biggest wave of tit-for-tat attacks on vessels in the Hormuz by both sides since the onset of the Middle East conflict in February.
Iran's Islamic Revolution Guards Corps said that Tehran will respond to any attack with a far greater number of strikes, noting that if the US hits two or three Iranian targets, its navy would respond by hitting 20 targets.
The risk is that escalation could lead to meaningful disruptions to Strait of Hormuz flows, ING strategists said in a note Thursday, adding that the market could tighten more sharply if ongoing escalation translates into disrupted oil flows.
On the demand side, China has reportedly stepped up purchases in recent weeks after months of subdued demand, boosting physical crude markets.
ING analysts said that while imports remain well below year-ago levels, they've started to recover from the lows seen in June, and recent physical-market activity suggests this could continue.