Oil Prices Climb as Houthi Attacks and Strait of Hormuz Uncertainty Heighten Supply Risks

Oil prices continued their upward trend on Monday, driven by escalating supply concerns as the timeline for reopening the Strait of Hormuz remains uncertain and Iran-backed Houthi rebels claimed new attacks on Saudi energy infrastructure.

As of early Monday trading, Brent crude futures rose 1.1% to $84.45 per barrel, while West Texas Intermediate (WTI) crude futures climbed 1.2% to $78.18 per barrel. The gains pushed Brent's rally to over 5% in the past three trading sessions.

Hormuz Impasse Adds to Supply Jitters

Market focus remains fixed on the critical Strait of Hormuz. Iranian Foreign Minister Abbas Araghchi stated over the weekend that an agreement with Oman to establish a shipping channel is "very close," according to Investing.com. However, he cautioned that the strait would not reopen immediately even if a deal is reached, tempering hopes for a swift resumption of energy flows.

Tehran has reiterated its conditions for a full reopening, which include the lifting of a U.S. naval blockade, the removal of sanctions, and compensation for damages. The uncertainty continues to disrupt shipping in the key oil chokepoint, underscored by a reported attack on a tanker owned by the Abu Dhabi National Oil Company (ADNOC) over the weekend.

Houthi Attacks Escalate Regional Tensions

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Adding to the geopolitical risk premium, Iran-backed Houthi rebels in Yemen claimed responsibility for an attack on the Jazan refinery on Saudi Arabia's Red Sea coast. Saudi authorities later confirmed that a fire at the Aramco facility resulting from the attack had been extinguished.

The latest incident fuels fears that the conflict could expand beyond the Strait of Hormuz, threatening alternative Middle Eastern oil export routes. The Houthis have also threatened shipping in the northern Red Sea and reportedly struck a Saudi tanker in the Gulf of Aden, further escalating regional tensions.

Market Context and Broader Risks

According to analysts at ANZ Bank cited in the source material, oil prices have been volatile. Prices initially fell last week on news that the U.S. would pause strikes on Iran to facilitate negotiations, but they rebounded as the market recognized that any reopening would likely come with strict limitations.

While Middle East tensions are the primary driver, other supply chain pressures persist. Attacks in recent weeks on Caspian Pipeline Consortium terminals in the Black Sea have threatened Kazakhstan's daily exports of approximately 1.8 million barrels. However, some of that risk was partially mitigated after Ukraine reportedly agreed not to target certain non-Russian tankers and energy infrastructure crucial to Kazakh exports.