Oil Prices Soar to Six-Week High as Iran and Houthis Threaten Key Shipping Lanes

Brent Crude Jumps to Six-Week High as Strait of Hormuz and Red Sea Threats Collide

Oil prices surged more than 2% in Asian trading on Thursday, pushing Brent crude to $96.27 — its highest level since 8 June — after Iran said it had mined the southern waters of the Strait of Hormuz and the Iran-aligned Houthi movement in Yemen announced a naval blockade of Saudi Arabia.

The twin escalations threaten to disrupt the two most vital arteries for global oil shipments: the Strait of Hormuz, through which roughly 20% of the world’s petroleum transits, and the Bab el-Mandeb strait at the southern end of the Red Sea. According to analyst Saul Kavonic of MST Marquee, the combined disruption could imperil up to five million barrels per day of oil supply, including the main route that allows Gulf crude to bypass Hormuz altogether.

Iran’s Revolutionary Guards said that the key waterway was now “completely closed” while US military operations continue and warned that no tanker could enter or leave without Iranian coordination. Hours later, US President Donald Trump vowed to destroy an Iranian bridge or power plant for every ship targeted in the strait, as the US military completed its twelfth consecutive night of strikes on Iran.

The market was already on edge after the Houthis struck the Saudi-flagged tanker Encelia in the Red Sea and forced about ten other vessels to turn back. For the first time, a real risk of simultaneous disruption at both chokepoints is now embedded in oil prices, said Priyanka Sachdeva of Phillip Nova, though a sustained rally would require evidence of lasting shipping interruptions or actual supply outages.

What a Dual-Chokepoint Crisis Means for Global Oil Markets

The Geopolitical Calculus Behind the Moves

Iran’s claim that Hormuz is mined — even if partially true — is a dramatic escalation from previous threats. Closing the strait entirely is logistically near-impossible, but deploying sea mines could deter commercial shipping and force insurers to declare the waterway a war zone. That alone would spike tanker insurance premiums by hundreds of thousands of dollars per voyage, making Gulf exports uncompetitive compared with alternative crudes unless oil prices rise further.

The Houthis’ new blockade of Saudi Arabia, targeting vessels carrying Saudi crude through Bab el-Mandeb, opens a second front. Even if the actual number of intercepted ships remains small, the threat alone could prompt Saudi Arabia to consider emergency export routes, such as the underutilised East-West Pipeline to the Red Sea port of Yanbu. However, that pipeline has a capacity of roughly five million barrels per day — exactly the volume that Kavonic warns could be at risk. A sustained Houthi campaign would therefore test the kingdom’s redundancy options.

Market Impact: Short-Term Spike or Sustained Rally?

The price jump reflects a sharp increase in the geopolitical risk premium, but as Sachdeva notes, a durable rally requires concrete supply losses. In the near term, physical markets may tighten as shipowners reroute vessels around the Cape of Good Hope, adding weeks to delivery times and burning extra fuel. This would push up the cost of long-haul cargoes, particularly for Asian refiners that are already the marginal buyers of Middle Eastern crude.

Should the US-Iran exchange of strikes intensify, it could cripple Iran’s already limited export capacity and further provoke Tehran to lash out at regional shipping. Trump’s vow to retaliate for each ship targeted raises the stakes dramatically: any incident could trigger immediate counter-strikes on Iranian infrastructure, heightening the risk of a broader conflict that genuinely disrupts production, not just transit.

Winners and Losers in a Two-Chokepoint Squeeze

Oil producers outside the immediate conflict zone stand to gain. US shale producers, already ramping up output, could see their crude commanded a higher premium as Asian buyers seek to avoid the risk corridor. Brazil, Norway and West African producers are also well-positioned to fill the gap. Conversely, Asian economies heavily dependent on Gulf oil — notably China, Japan and South Korea — face higher import bills and potential fuel shortages, even if they tap strategic reserves.

The shipping industry is caught in the middle. Tanker operators must weigh crew safety against contractual obligations; rerouting adds costs and can disrupt the delicate scheduling of global crude movements. A sustained disruption would likely lead to a spike in very large crude carrier (VLCC) rates on alternative long-haul routes, as seen during the 2019 Hormuz tensions.

Immediate Actions for Shippers, Traders and Governments

• Shippers and charterers: With the Houthis already forcing ships to retreat, operators serving Saudi Red Sea ports should immediately assess discharge alternatives, including the East-West Pipeline or switching to Ras Tanura on the Gulf side. Tanker insurance costs for voyages transiting Hormuz are likely to jump; negotiate war risk cover before departures or reroute around the Cape of Good Hope, which adds roughly 10 days to a Gulf-to-Europe journey.
• Oil traders and refiners: The forward curve may steepen if prompt supply tightens, creating opportunities for floating storage plays. Asian buyers should accelerate purchases of crude from non-Middle Eastern sources — US WTI, Brazilian Lula, Norwegian Johan Sverdrup — to build a buffer against a prolonged Hormuz disruption. Benchmark Brent’s recent backwardation is fragile and could swing into contango if shipping disruptions ease, so hedge physical exposure accordingly.
• Governments and strategic stockpile managers: The combined threat puts up to 5 million b/d at risk. The IEA is likely to monitor the situation, and member countries should prepare accelerated releases from strategic reserves to prevent an oil price shock from feeding into broader inflation, particularly in Europe and Asia. A coordinated release could cap prices around $100 per barrel if the disruption endures beyond a few weeks.
• Energy companies with Gulf exposure: Evaluate downstream feedstock contracts that rely exclusively on Saudi or Iraqi crude delivered via the Red Sea or Hormuz. Diversifying into Atlantic Basin crudes now could mitigate supply shocks, even if it means a short-term cost premium. For European refineries, backing out Saudi barrels with domestic North Sea or African grades is a realistic insurance policy.