DUBAI, July 24 - U.S. President Donald Trump pledged "major military punishment" for Iran and the Houthi movement after Yemeni fighters struck two Saudi oil tankers in the Red Sea, broadening the Middle East conflict to a second major maritime chokepoint. The assaults heightened market anxiety about a wider disruption of shipping routes and helped drive one of the sharpest oil price increases since the conflict began.
Brent crude jumped more than 6% on the news, moving above $100 a barrel for the first time since May. The price surge reflected investors' concern that the fighting could impede seaborne energy flows, compounding already elevated volatility in energy markets.
The Houthis, who exercise control over northern and western Yemen, said they had imposed a naval blockade on Saudi Arabia and that their forces had struck two Saudi oil tankers identified as the Encelia and the Layla. Saudi Arabia has rerouted millions of barrels per day by pipeline to the Red Sea to avoid Iran’s blockade in the Strait of Hormuz - a factor that makes access to the Bab el-Mandeb strait particularly consequential for crude shipments.
A maritime security source reported that the Encelia sent a distress call after being struck by a missile near the Saudi port of Jizan in the Red Sea, just north of Yemen, with Saudi state news agency SPA saying the strike caused a fire at the vessel’s bow. Reuters was unable to immediately confirm the report concerning the Layla or other battlefield details, but the U.S. president publicly referenced two attacks on Saudi tankers.
Shipping insurance premiums through the southern Red Sea rose sharply following the attacks, with some companies seeing costs double on Thursday, according to industry sources. Tankers have begun altering routes to avoid the Bab el-Mandeb, redirecting north through the Suez Canal or electing the longer, more expensive passage around Africa to reach Asian markets. Shiptracking data showed the number of tankers transiting the Strait of Hormuz fell to just one on Thursday, its lowest level since May 7.
Trump said the United States would hold Iran responsible for further Houthi attacks, characterising the Houthis as a "Surrogate and/or Proxy of Iran" and warning that additional incidents would trigger punitive action. On social media he added that "any and all damages done" to cargo ships would be paid with "Iranian Money," referring to frozen Iranian assets held by the United States, though he did not specify mechanisms for such compensation.
In an interview with Axios, Trump said he was weighing the resumption of major combat operations against Iran and was "close to a decision," adding, "They haven’t received enough pain yet."
Iranian Foreign Minister Abbas Arachi pushed back on the suggestion of seizing assets, posting on X that taking another nation’s assets to cover unrelated claims would set an "incendiary precedent." He warned that if governments normalised that approach, "No one’s assets were safe" and that ensuing chaos would be neither pretty nor peaceful.
The U.S. military carried out air strikes on Iran late on Thursday and into early Friday, marking a 13th consecutive night of attacks, according to reporting of the operations. Iranian state media said the country had fired missiles at neighbouring Arab states that host U.S. bases, and reported strikes on Qeshm Island in the Strait of Hormuz on both Thursday and Friday nights.
State broadcaster IRIB reported that four people were killed and five wounded in a U.S. missile strike on the Iranian city of Ahvaz.
Sources in Iran and Yemen told Reuters that Iran had moved Revolutionary Guard commanders, military advisers and equipment related to missiles and drones into Yemen in the days before the Houthis announced their Red Sea blockade; the Houthi leadership dismissed that account.
The conflict has also produced a series of reciprocal strikes against military targets in the region. Iran said it attacked U.S. missile systems, weapons and fuel storage sites in Jordan and targeted U.S. military posts in Kuwait. Jordan’s army reported it engaged four Iranian missiles and six drones over a 24-hour period and intercepted all but one missile, which fell in an uninhabited area.
Iran’s Islamic Revolutionary Guard Corps stated that it struck a U.S. electronic warfare unit at the Al-Adiri base in Kuwait, causing unspecified casualties, an action the Guards said was in response to an overnight strike on Iran’s Shalamcheh border crossing with Iraq. Neither the United States nor Kuwait had reported casualties at the base.
Brigadier General Mohammad Akraminia, an Iranian military spokesperson, was quoted on state television saying Iran would continue to retaliate so long as the U.S. persisted in strikes on Iranian infrastructure and coastal areas.
Officials have repeatedly shown that Iran can reach U.S. targets in the region. Earlier in the war, Iranian strikes on CIA-related targets in the Gulf prompted U.S. intelligence to explore whether Russia provided Iran with targeting information or drone technology, according to four people familiar with U.S. intelligence matters.
Political dynamics in Washington have been affected by the spike in oil prices. Rising energy costs are contributing to global inflationary pressures and have placed strain on Republican lawmakers ahead of congressional elections in November. The Republican-controlled U.S. House of Representatives approved legislation directing the president to cease U.S. military action against Iran - a rebuke grounded in Congress’s constitutional authority to declare war - though similar resolutions previously passed without halting the conflict. The Senate later blocked a comparable measure.
The immediate market and operational impacts are clear: higher crude prices, increased shipping costs, and altered vessel routing that could raise delivery times and freight expenses. The further militarisation of the Red Sea corridor adds another layer of risk to global energy supply chains already affected by the fighting centred on the Strait of Hormuz and other theatres.
At present, many details remain contested, with competing accounts from state media, naval security sources, and officials in Tehran, Riyadh, and Washington. Where the escalation travels next will hinge on decisions by state and non-state actors across the region, all of which have the potential to influence energy markets, maritime insurance, and broader economic conditions.