Brent crude jumps 6.6% to $90 as Middle East strikes escalate

Brent crude returned to $90 a barrel as Houthi and US-Saudi strikes threatened two of the world's most critical oil shipping lanes.

Brent crude climbed 6.64 percent to $90 a barrel on July 29 as Houthi attacks on a Saudi tanker and joint US-Saudi strikes in Iraq threatened the Strait of Hormuz and Red Sea lanes that carry about 20 percent of global oil.

"Every day that goes by, the situation gets more difficult," Mike Wirth, chief executive at Chevron, said, warning that attacks by Iran-backed Houthi forces threaten shipping corridors used for Saudi crude exports.

WTI crude rose 6.61 percent to $84.5 a barrel, while Mexican export crude gained 93 cents to $80.56. The moves extend a 24 percent monthly surge in July, the steepest since March, after US crude inventories fell to their lowest since 2018, according to the Energy Information Administration.

Any further escalation could push Brent toward $100 a barrel, adding to global inflationary pressure and complicating the Federal Reserve's path on rates. Traders are watching whether the conflict spreads beyond energy infrastructure to broader regional shipping.

The Houthis said Tuesday they launched a missile attack on the Saudi-flagged tanker NCC Ghazal, forcing it to change course after it ignored repeated warnings. The Saudi Ministry of Defense said Wednesday that its forces, coordinating with US Central Command, carried out precision strikes against pro-Iranian militants in Iraq suspected of launching drone attacks — more than 30 of which targeted US military and Saudi energy facilities over the previous 72 hours.

President Donald Trump said the US military intercepted a ballistic missile Iran launched at Jordan overnight and confirmed the strikes against Iran-backed Iraqi Shia militia groups were coordinated with the Iraqi government. He called the groups "a cancer on the world" and said the US is considering further warnings to Iranian proxy forces. Iran denied involvement in attacks on Saudi targets, calling the attribution a "serious miscalculation."

Two Choke Points Under Pressure

The Strait of Hormuz, which normally carries about 20 percent of the world's crude oil and natural gas, has seen traffic drop sharply since the US-Iran conflict escalated in late February. The Houthi militia has separately blocked shipping through the Bab el-Mandeb Strait connecting the Gulf of Aden to the Red Sea, forcing operators onto longer, more expensive routes. US commercial crude stocks at multi-year lows have made the market more sensitive to any disruption in foreign flows, according to Gelber & Associates.

Producers Reap the Windfall

The price surge boosted second-quarter earnings at the world's largest oil producers. Chevron reported net income of $12 billion, nearly five times the $2.5 billion a year earlier, with adjusted earnings of $6.06 a share beating the $5.56 consensus. ExxonMobil posted profit of $14.5 billion, roughly double the $7.1 billion a year earlier, though adjusted earnings of $3.52 a share narrowly missed the $3.60 estimate. US benchmark crude averaged $92.45 a barrel between April and June, up 27 percent from the prior quarter.

Iran on Aug. 2 denied President Donald Trump's claim that a deal exists to reopen the Strait of Hormuz, sending oil prices higher again on renewed supply disruption fears. If attacks on vessels and energy infrastructure continue, the risk of a sharper price spike remains high; if diplomatic efforts gain traction, markets could stabilize, though underlying tensions are unlikely to disappear quickly.

This article is for informational purposes only and does not constitute investment advice.