Houthi Attacks on Red Sea Oil Tankers Rattle Energy Markets

Iran-backed Houthis in Yemen have opened a new front in global energy markets and maritime shipping by targeting Saudi oil tankers in the Red Sea. The recent attacks amplify geopolitical risks in the region, exerting significant pressure on global supply chains amid already strained US-Iran relations and navigation issues in the Strait of Hormuz. This situation has led to substantial increases in oil prices and is negatively impacting global inflation expectations.

Houthi military spokesperson Yahya Sarea announced on Thursday that they targeted two Saudi-flagged oil tankers, Encelia and Layla, with missiles and drones in the Red Sea. These attacks were carried out on the grounds that the vessels violated the group's declared maritime blockade against Saudi Arabia. The UK Maritime Trade Operations (UKMTO) also reported that a projectile struck a ship southwest of Saudi Arabia's Red Sea coast, causing a fire on board. This marks the first direct attacks by the Houthis on oil tankers in the Red Sea, expanding the geographical scope of the conflict in the region.

Following the attacks, significant volatility was observed in global oil markets. Brent crude futures approached $96 per barrel, while US West Texas Intermediate (WTI) crude surpassed $88 per barrel, pushing both benchmarks to their highest levels in nearly six weeks. Analysts warn that a full closure of Red Sea shipping routes could drive crude oil prices up to $115-$120 per barrel. The Bab el-Mandeb Strait, a critical chokepoint connecting the Red Sea with the Gulf of Aden, is vital for crude and fuel shipments between the Middle East, Europe, and Asia, underscoring the route's importance.

This escalation in the Red Sea is viewed within a broader regional and global economic context. Houthi attacks, which began in late 2023 in response to Israel's military operations in Gaza, have already forced many major shipping companies to reroute their vessels around the Cape of Good Hope, the southern tip of Africa. This has already strained global supply chains, extending shipping times by approximately 30 days and significantly increasing freight and insurance costs. Experts suggest that a sustained disruption in the Red Sea could add between 0.7 and 1 percentage point to global core goods inflation.

Market analysts and experts emphasize that the trajectory of tensions in the Red Sea will be a decisive factor for global energy and trade markets in the coming period. The continuation of US strikes against Iran and Iran's threats to commercial vessels in the Strait of Hormuz pose a risk of further escalation in the regional conflict. This situation could specifically disrupt Saudi Arabia's oil exports from its Red Sea port of Yanbu, leading to additional strains on global oil supply. Investors are advised to closely monitor geopolitical developments and anticipate continued volatility in energy markets.