Oil Prices Surge to Five-Week High as U.S.-Iran Tensions Escalate and Houthis Threaten Blockade

International oil prices closed about 2% higher on Tuesday (21st), with both benchmarks hitting five-week highs. Markets continued to digest the escalating conflict between the U.S. and Iran, along with threats by Yemen’s Houthi militants to impose a maritime blockade on Saudi Arabia, raising supply risks. Investors fear further disruptions to energy shipments through the Middle East, driving crude prices higher.

London Brent crude for September futures rose $1.79, or 2%, to settle at $91.01 per barrel. U.S. West Texas Intermediate (WTI) crude for August futures gained $1.68, also up 2%, closing at $84.91 per barrel—both marking their highest closing levels since June 10 and June 11, respectively. Notably, Brent crude has remained in technically overbought territory for seven consecutive trading sessions, the first time since June 2025.

Energy advisory firm Gelber & Associates noted that the current price surge does not reflect a significant physical supply shortage, but rather a market reassessment of logistical disruption risks. The firm warned that energy transport in the Middle East could remain disrupted over the next week, especially if Saudi exports to Asia or Red Sea shipping lanes face further obstacles, potentially heightening supply risks.

On the military front, U.S. forces conducted airstrikes for the ninth consecutive night on military targets in southern and western Iran. In response, Iran launched missile and drone attacks on U.S.-linked facilities in Bahrain, Kuwait, and Jordan. At least one oil tanker was attacked near the Strait of Hormuz. Meanwhile, Yemen’s Houthi movement announced a maritime blockade against Saudi Arabia on Monday, further expanding the conflict and increasing risks to global energy supplies and international trade.

According to LSEG ship-tracking data, two oil tankers fully loaded with Saudi crude oil, originally bound for China and India, turned back in the Red Sea this week after Houthi threats, redirecting toward the Suez Canal. However, market sources indicated that Saudi Arabia’s Yanbu oil export terminal on the Red Sea remains operational, with no significant loading or unloading disruptions reported so far.

Additionally, the Joint Organisations Data Initiative (JODI) released new data showing Saudi Arabia’s crude oil exports in May fell for the third consecutive month, reaching a historic low—reflecting OPEC+’s ongoing production cuts and export strategy adjustments.

Beyond the Middle East, the Russia-Ukraine war continues to impact global energy supplies. Market sources reported that following a series of attacks on oil tankers at Russian Black Sea ports, the Caspian Pipeline Consortium (CPC) suspended loading operations on Monday and has since halted intake of Kazakh crude oil. Russia accused Ukraine of orchestrating the attacks, but Kyiv has not yet commented.

Analysts pointed out that simultaneous geopolitical risks in two major energy transit corridors—the Middle East and the Black Sea—are tightening the global crude supply outlook, forming a key support for recent oil price strength.

Markets now await crude inventory data from the American Petroleum Institute (API) later today and the U.S. Energy Information Administration’s (EIA) official report on Wednesday. According to a Reuters survey, analysts on average expect U.S. commercial crude inventories to have declined by about 500,000 barrels for the week ending July 17. If realized, this would mark the second consecutive weekly drawdown. In comparison, inventories fell by 3.2 million barrels year-earlier and averaged a 1.2 million barrel decline over the past five years (2021–2025) for the same period.

Analysts said oil prices could remain elevated in the short term if U.S. crude inventories continue to decline and Middle East tensions show no clear signs of de-escalation. However, if ceasefire talks between the U.S. and Iran make progress, easing supply concerns, the upward momentum in prices could be curbed.