Oil prices pushed higher on Wednesday amid renewed fighting in Yemen and fresh maritime incidents in the Strait of Hormuz that together tightened market perceptions of supply risk.
Price moves - Brent crude futures for December delivery rose 0.4% to settle at $106.10 a barrel. U.S. West Texas Intermediate (WTI) crude futures for November delivery gained 1.1% to finish at $95.17 a barrel. Traders cited the intensification of Houthi attacks and a separate Iranian incident in Hormuz as key drivers of the uptick.
Escalation between Houthis and the Saudi-led coalition
Fighting between Iran-backed Houthi forces and the Saudi Arabia-backed coalition in Yemen has stepped up, increasing concerns over threats to vessels transiting the Bab el-Mandeb Strait. The conflict has included a recent wave of Houthi strikes on Saudi airports and energy infrastructure. One such strike last Saturday was deadly, killing 13 people, and prompted retaliatory action by the Saudi-led coalition against the Yemeni capital, Sanaa.
On Wednesday, the Houthis struck targets inside Saudi Arabia, including what they said were attacks on Saudi Aramco’s Dhahran complex, an Aramco refinery in Riyadh, and King Khalid International Airport - the same airport hit over the weekend. The Saudi-led coalition has intensified operations this month to try to retake territory seized by the Houthis around the Bab el-Mandeb Strait.
Political commentary has accompanied the fighting. President Donald Trump on Tuesday accused the Houthis of "purposefully trying to drive up" oil prices ahead of the November U.S. midterm elections. Market analysts noted the apparent ability of Houthi forces to strike deep inside Saudi territory and the lack of an obvious Saudi response as a material development for regional stability and energy security. "The Houthis appear to be able to harass Saudi Arabia at will, and the Kingdom has no obvious response. This is a very serious turn of events as the U.S./Iranian war continues into its eight month and as the violence spreads," said David Morrison, senior market analyst at Trade Nation.
Maritime incidents in the Strait of Hormuz
Separately, Tehran and Washington remain at odds over control of the Strait of Hormuz as Iran has stepped up attacks on commercial shipping there. Iranian state media reported on Wednesday that a container ship attempting to transit the strait struck a naval mine and sank, citing a statement from the Iranian Armed Forces that similar incidents would continue until Tehran’s conditions to reopen the waterway were met.
The United Kingdom Maritime Trade Operations (UKMTO) had received a report that a 19,000 tonne container ship was struck by an unknown projectile while trying to exit the strait. Singapore identified the vessel as the GFS Pride and said the ship sank after the incident, with all 21 crew members safely evacuated.
Incident reports from the UKMTO show that more than 20 vessels, mostly oil tankers, have been attacked this month in the Strait of Hormuz, the Persian Gulf and the Gulf of Oman. Reuters reported that Iran is preparing new tactics to target vessels in Hormuz as part of a push to keep oil prices elevated ahead of the U.S. midterm elections. Polling data cited by analysts suggests candidates from President Trump’s Republican Party may face voter backlash linked to an energy price shock attributed to the Iran conflict.
U.S. inflation and refined fuel pressures
Energy-related price pressures in the United States added to market nervousness. The latest consumer price index data showed headline CPI rose 0.6% month-on-month in September, in line with estimates and up from a 0.4% rise in August. Gasoline prices were a primary contributor, with the gasoline index jumping 9.1% month-on-month and accounting for more than half of the monthly increase in headline CPI. The broader energy index climbed 20.4% year-on-year last month.
Refined fuel markets have been under particular strain. U.S. diesel prices have surged as global diesel costs rose amid the Middle East violence and due to Ukrainian attacks on Russian refineries. Earlier in the week, supply concerns had momentarily eased after President Trump announced an agreement with Russia to release diesel stocks into the global market to help lower prices. Russia indicated on Monday that its diesel exports may exceed the volumes agreed under that deal, a development that complicated expectations about how much relief would be available to global refiners and consumers.
Market implications
Traders continue to weigh the immediate impact of attacks on infrastructure and shipping against the potential for supply responses from producers and refiners. The concentration of incidents along key chokepoints and against energy facilities has elevated risk premia in crude and refined product markets, with implications for consumer prices and inflation measures. Analysts and market participants will be monitoring whether the pattern of strikes and reprisals broadens or eases in the near term.
Ambar Warrick and Scott Kanowsky contributed reporting to the piece.