Oil Prices Extend Rally to Fifth Day on Red Sea Tanker Attack Claims

Oil prices continued their upward trend in Asian trading, marking a fifth straight day of gains after Iran-aligned Houthi militants reported strikes on two Saudi oil tankers in the Red Sea. The news intensified market fears of significant supply disruptions through critical Middle East maritime routes.

During Thursday's session, Brent crude futures for September delivery rose 1.7% to $95.62 per barrel, while West Texas Intermediate (WTI) crude futures climbed 1.5% to $88.18 per barrel, according to market data from Investing.com.

Geopolitical Tensions Escalate

The Houthi group claimed responsibility for targeting the Saudi tankers ENCELA and LAYLIA, accusing them of breaching a maritime blockade the group had recently announced. While Saudi authorities have not yet confirmed any damage to the vessels, the incident represents a significant escalation in a conflict that increasingly threatens global energy infrastructure.

The attack follows Houthi warnings earlier in the week of their intent to block Saudi-linked shipping through the Bab el-Mandeb Strait. This narrow waterway is one of the world's most vital energy chokepoints, connecting the Red Sea to the Gulf of Aden and serving as a primary transit route for seaborne crude shipments.

Market Impact and Supply Chain Risks

A sustained disruption in the Bab el-Mandeb Strait could force oil tankers to take a much longer and more expensive route around southern Africa, significantly increasing voyage times and freight costs. Energy traders are now closely monitoring rising transportation risks and insurance premiums.

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These concerns are compounded by ongoing tensions between the U.S. and Iran, which create uncertainty around the Strait of Hormuz, another indispensable route for global oil exports. Together, the two straits handle a substantial portion of the world's seaborne crude oil, making their security a paramount concern for energy market stability.

U.S. Inventory Data Overlooked

The price rally driven by geopolitical risk occurred despite bearish data from the United States. The U.S. Energy Information Administration (EIA) reported an unexpected increase in domestic inventories for the week ending July 17.

Key figures from the EIA report include:

• Commercial crude inventories rose by 2.0 million barrels, contrary to market expectations for a draw.
• Gasoline inventories increased by 0.8 million barrels.
• Distillate stockpiles grew by 1.4 million barrels.

Typically, a build in inventories would place downward pressure on prices. However, the market's current focus remains fixed on the escalating supply-side risks stemming from the conflict in the Red Sea.