Global oil prices have been recording a sharp rise as tensions renewed between Iran and the United States. For the first time since May after the second spell of attack, the global oil prices have hit $100 a barrel. Brent Crude, the international benchmark, rose more than 6% on Thursday to 100.40 dollars per barrel, whereas WTI crude stood at 91.76 dollars per barrel as per data from a global oil price monitor.
The prices surged after a brief period of easing in the oil markets following a temporary ceasefire between the two countries. Prices had reached levels similar to those prior to the military action that begab first in February. However the recent hostilities have rattled the energy markets once again.
The latest surge in oil prices stemmed from a series of attacks by Houthi group on Saudi oil tankers transiting the Bab al Mandab Strait, a maritime check point similatlr to the Strait of Hormuz, but linking Red Sea with Gulf of Aden. The attack came after several warning by Iran backed Yemeni group against loading or unloading cargo at Saudi ports, threatening to target vessels that ignored the warning. The group later claimed at least six ships had altered their routes following the warning.
Why is Bab al Mandab in focus?
The Bab el-Mandeb Strait, located between the Arabian Peninsula and the Horn of Africa, has become an increasingly important route for global oil supply during the conflict, as it was the only waterway that connected the West and the East.
Historically, the route has transported about 4.1 million barrels and refined petroleum products in a day, roughly accounting for 5% of the global seaborne oil flows. While this is significantly lower than the amount of global oil that supplies normally through the Strait of Hormuz, its strategic importance has grown now as exporters have sought alternative routes in view of closure of the Strait of Hormuz and regional tensions.
Ever since the war began, Saudi Arabia has increasingly relied on its East-West Pipeline, transporting crude from the Abqaiq processing facilities to the Yanbu export terminal on the Red Sea coast. This has enabled a substantial share of the kingdom’s exports to bypass the Strait of Hormuz and reach international markets via the Red Sea. As Houthi attacks threatens shipping through Bab al-Mandab as well, traders fear disruptions across two of the world’s most important energy chokepoints.