- Oil prices surged over 3% as Iran-backed Houthis launched missile strikes on Israel
- Brent crude crossed $116 per barrel; WTI surpassed $100 amid supply disruption fears
- Key shipping routes like Bab el-Mandeb Strait and Red Sea face potential missile threats
Oil prices surged at the start of the week as the West Asia conflict widened, with Iran-backed Houthi forces in Yemen launching missile strikes on Israel. The escalation — coupled with a fresh deployment of US troops in the region — has rattled global energy markets already on edge.
Brent crude jumped over 3% in early trading to cross $116 per barrel, putting it on track for one of its strongest monthly gains on record. US benchmark West Texas Intermediate also climbed past the $100 mark. The rally reflects growing anxiety that supply disruptions could intensify if the conflict spreads further across key oil-producing and transit regions.
Shipping Routes and Supply Lines Under Threat
While the Houthis have not explicitly targeted maritime routes yet, their strategic positioning raises concerns. The Bab el-Mandeb Strait and southern Red Sea — critical chokepoints for global oil shipments — remain vulnerable. Any disruption here could significantly delay cargo flows between Europe and Asia.
Saudi Arabia's Red Sea export hub at Yanbu, increasingly crucial as traffic through the Strait of Hormuz slows, is also within missile range. Riyadh has already been diverting shipments through this route to cushion the impact of restricted flows via Hormuz, where Iran has tightened control and limited vessel movement.
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Despite ongoing diplomatic outreach, including recent talks mediated in Pakistan, the conflict shows little sign of easing. The US has ramped up its military presence, raising the possibility of a prolonged engagement. Reports suggest contingency planning for ground operations is underway, although senior officials have sought to temper such expectations.
Adding to tensions, former US President Donald Trump indicated a willingness to target Iran's oil infrastructure, including the key export terminal at Kharg Island — a move that could provoke sharp retaliation.
A Market Bracing for the Worst
Oil has already surged nearly 60% this month, reflecting the scale of disruption fears. Analysts warn that prices could climb even higher if the conflict persists and critical supply routes remain constrained. Some projections suggest crude could spike dramatically in a worst-case scenario involving prolonged closures of major transit corridors.
Market signals point to immediate supply tightness, with near-term oil contracts trading at a steep premium — a sign traders are scrambling for prompt deliveries.
The fallout is extending beyond crude. Industrial metals have also reacted sharply, with aluminium prices rising after key production facilities in the region were hit by missile strikes. The broader concern: a synchronized shock to commodities, reigniting inflation risks just as global growth remains fragile.
Get the latest updates on the US, Israel-Iran war here.
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