Oil fell at the end of a volatile week, but remained on track for the biggest monthly gain since March as the US-Iran war escalated.
Brent traded below $88 a barrel after swinging in a range of about $11 this week, with the global benchmark up by about a fifth in July. US crude gauge West Texas Intermediate was near $82 a barrel.
While the US and Iran again exchanged strikes on Thursday, shipping through the Strait of Hormuz appears to have picked up in recent days. Meanwhile, Saudi Arabia discussed with representatives of 43 countries forming an alliance to protect navigation in and around the Red Sea, hoping to counter a blockade the Iran-backed Houthi militants imposed on the kingdom last week.
In a televised speech on Thursday, Houthi leader Abdulmalik al-Houthi said there were indications the Saudis were heading toward “comprehensive escalation,” which he said would be met with a fiercer campaign. Apart from strikes on tankers, the group recently claimed attacks on oil facilities.
Energy markets have roared higher in July, with double-digit percentage gains for oil as well as products such as diesel. This month, a fragile pause in hostilities between Washington and Tehran collapsed, the Yemen-based Houthis entered the fray, and Saudi Arabian forces joined the US to strike Iran-backed groups in Iraq. US stockpiles have continued to draw.
After starting the war with Israel in late February to challenge Tehran’s nuclear program, President Donald Trump is once again facing a conundrum of whether to escalate the conflict further in retaliation for Iran’s attacks on US assets, or focus on calming turmoil in global energy markets.
“It’s a real wait-and-see to see if this is going to expand, and if the US is going to retaliate in the way that Trump is threatening or if this is going to be kind of a tit-for-tat but on a relatively smaller scale,” said Carolyn Kissane, associate dean at New York University’s Center for Global Affairs.
In addition to the Houthi blockade of Saudi ports in the Red Sea, the US has imposed a full interdiction of vessels calling at Iranian ports, while Tehran continues to menace shipping transiting the Strait of Hormuz, the narrow waterway that links the Persian Gulf to global markets.
Traders were also still assessing rare vessel attacks in the Mediterranean. Earlier this week, fires broke out aboard two liquefied natural gas vessels at an Egyptian port after they were hit by drones. No party claimed responsibility.
Beyond the Middle East, traders are also concerned about supply snarls in the Black Sea. Loadings at the terminal vital to Kazakhstan’s crude exports were halted again this week after fresh tanker attacks. Nine vessels have now been attacked at or bound for the Caspian Pipeline Consortium facility this month alone, the most since Russia’s invasion of Ukraine in 2022.