Oil Prices Rise Over 1% as Hormuz Strait Traffic Drops to Single Digits Amid Houthi's Maritime Blockade on Saudi Arabia

International oil prices rose sharply on Monday (21st), closing up over 1% after significant intraday volatility. Markets continued to assess the prospects of renewed negotiations between the U.S. and Iran, while closely monitoring Yemen's Houthi rebels' announcement of a maritime blockade on Saudi Arabia and the ongoing decline in shipping through the Strait of Hormuz, with geopolitical risks continuing to support crude prices.

Brent crude for September futures rose $1.12, or approximately 1.3%, closing at $89.22 per barrel, briefly touching $91.42 during the session—the highest level since June 11. U.S. West Texas Intermediate (WTI) August futures gained $0.74, or about 0.9%, closing at $83.23 per barrel, with an intraday high of $85.39, the highest since June 12.

Reuters cited a senior Iranian official reporting that mediators have presented Tehran with a de-escalation proposal suggesting a 10-day ceasefire, aiming to revive last month’s temporary agreement and create space for renewed negotiations.

Daniela Hathorn, Senior Market Analyst at Capital.com, stated that although the conflict remains far from resolution, market expectations of renewed U.S.-Iran talks have temporarily eased investor concerns about further deterioration in shipping through the Strait of Hormuz and global crude supply.

However, tensions in the Middle East continue to escalate. The U.S. military conducted its ninth consecutive night of military strikes against Iran over the weekend, while U.S. allies Kuwait and Bahrain reported renewed attacks from Iran.

Meanwhile, Iran-backed Yemeni Houthi rebels announced a maritime blockade on Saudi Arabia, seen by markets as a new front in the potential expansion of Middle Eastern conflict, further increasing risks to global energy supplies and international shipping.

Jorge León, Head of Geopolitical Analysis at Rystad Energy, pointed out that if the 10-day ceasefire fails and the Strait of Hormuz remains highly restricted, coupled with intensified Houthi threats to Red Sea shipping, global oil prices could surge again. He estimates that around 2.5 million barrels per day of Saudi crude exports could be affected by the Houthi blockade.

Nonetheless, factors are also emerging to cap oil price gains. Energy data firm Kpler noted that current global floating oil storage stands at approximately 1.35 billion barrels, a record high. This large inventory helps buffer short-term supply disruptions, limiting further upside in oil prices.

Markets are also closely watching shipping activity through the Strait of Hormuz. According to LSEG data, only four vessels passed through the strait on the 20th, down 50% from the previous day’s eight. Shipping traffic has continued to shrink since hostilities intensified, reflecting shipowners’ and insurers’ heightened caution over regional security risks.

Data shows that since last Friday, at least three oil product tankers and one Very Large Crude Carrier (VLCC) have entered the Strait of Hormuz to load crude. However, satellite imagery and industry sources indicate that ship-to-ship (STS) crude transfer operations off the coast of the Strait have significantly slowed due to repeated Iranian attacks on merchant vessels.

Greek shipping company Dynacom Tankers reported that two of its managed oil tankers were attacked by an unidentified flying object while sailing off the coast of Oman on the 21st.

Iran’s Revolutionary Guard claimed that two oil tankers attempting to pass through what it called the 'unsafe southern route' exploded and lost power. The day before, the Guard had also reported that two other vessels experienced 'incidents' in the same area. It remains unclear whether these events are related to the Dynacom Tankers attack.

ANZ analysts noted that the supply-side narrative in the oil market is gradually turning bearish. Initial expectations of a rapid recovery in shipping activity have nearly stalled, with the number of vessels passing through the Strait of Hormuz dropping to single digits per day.

Meanwhile, shipping tracking data shows that despite the slowdown in Hormuz Strait traffic, crude and condensate exports from Persian Gulf oil producers in the first half of July rose to their highest level since before the outbreak of hostilities at the end of February, indicating that producers are actively maintaining export capacity through alternative routes and existing inventories. However, the sustainability of this trend will depend on the evolution of the Middle East situation.