Following a cargo ship coming under a missile strike in the Bab el-Mandeb Strait last night, the global oil market reacted immediately. On the London Exchange, the price per barrel of Brent crude rose to $91.63, WTI to $85.28, and Urals to $84.60. Meanwhile, Azerbaijan’s Azeri Light crude, favored for its low sulfur content and high quality, is trading higher at $94.58.
Sea-news.az reports that despite goodwill statements from US and Iranian officials, the Bab el-Mandeb Strait has joined the Strait of Hormuz in becoming a high-risk zone.
The fact that the targeted vessel was a container ship rather than a tanker does little to change the situation, as Houthi rebels have indicated they will target oil tankers if detected.
According to Reuters estimates, in the event of a severe blockade, global oil prices could surge to $115–120 per barrel. The core of the issue is that price increases will be heavily driven by the approaching winter season. Middle Eastern nations had begun utilizing the Bab el-Mandeb Strait due to risks in the Strait of Hormuz. However, the Houthis—seeking to disrupt US military operations in the region—have now created dangerous conditions in Bab el-Mandeb as well.
Data from the US Energy Information Administration (EIA) indicates that stability in the Strait of Hormuz is not expected anytime soon, largely due to deadlocked negotiations between Iran and the US. Currently, both parties trade accusations while taking no practical steps to reopen the strait, though active military engagements remain paused.
While Qatar and Pakistan facilitate information exchanges, both Washington and Tehran are suffering from the closure of the straits and the resulting drop in global oil supplies: Iran is unable to sell its oil, while the US is concerned over rising domestic fuel prices. With demand for energy traditionally rising ahead of winter, market fundamentals point toward continued price growth. In this light, analysts project that oil prices will exceed $100 during the upcoming winter months.
