Oil hits five-week highs as Red Sea shipping risks mount
Escalating U.S.-Iran strikes and a Houthi blockade threat on Saudi tankers are driving a sustained risk premium into crude markets.
Brent crude rose 1.57% to $92.44 and West Texas Intermediate gained 1.39% to $85.51 in early Asian trading on Wednesday, pushing both benchmarks to five-week highs. The rally marks a steady climb from early July lows, fueled by an 11th consecutive night of U.S. military strikes against Iranian targets.
While the U.S. Central Command insists the Strait of Hormuz remains open to commercial traffic, oil markets are focused on the deteriorating security for actual vessels. CENTCOM reported targeting "Iranian military operations centers, maritime assets, aircraft hangars, drone storage facilities and logistics infrastructure." However, for shippers and insurers, U.S. assurances carry less weight than a verified end to hostilities, particularly after CENTCOM noted Iran has attacked over 30 commercial vessels in the past three months.
The threat to physical supply is now compounding through a second critical chokepoint. Three Saudi oil tankers executed U-turns in the Red Sea on Tuesday after Yemen's Houthi movement declared a formal blockade on Saudi crude passing through the Bab el-Mandeb Strait. This represents a severe logistical vulnerability for Riyadh. Saudi Arabia has increasingly routed its exports through the Red Sea to avoid Iranian threats at the Strait of Hormuz, meaning any sustained disruption at Bab el-Mandeb would squeeze one of the few remaining alternative export routes for Gulf producers.
There is little expectation of a near-term de-escalation to ease this supply anxiety. The latest U.S. strikes followed Kuwait's interception of Iranian drones, marking a widening of the regional conflict. President Trump explicitly signaled that military operations are set to intensify, stating the United States currently has "no interest" in renewed negotiations. With military exchanges expanding across multiple fronts, the geopolitical risk premium embedded in crude prices shows no signs of fading.
Fundamental supply data provided limited direction ahead of the official EIA release later Wednesday. The American Petroleum Institute reported increases in U.S. crude and distillate inventories last week, offset by a draw in gasoline stocks. For now, physical inventory levels remain a secondary concern to the mounting risks surrounding global shipping lanes.
