Global crude oil prices rose by more than 2% on Thursday, as Brent crude surpassed $96 a barrel following attacks on two Saudi Arabian oil tankers in the Red Sea by Iran-backed Houthi militants. Brent crude, the international benchmark, increased by 2.5% or $2.42 to trade above $96 a barrel, reaching a six-week high. Similarly, the US benchmark West Texas Intermediate (WTI) surged over 2% or $1.84, remaining close to $88 a barrel.
The Houthi militants claimed responsibility for targeting the Saudi oil tankers Encelia and Layla using missiles and drones, alleging a breach of their imposed blockade by the vessels. Earlier, the UK Maritime Trade Operations (UKMTO) reported an attack on a commercial vessel off Saudi Arabia’s Red Sea coast near Al Shuqaiq, resulting in a fire onboard. However, the specific ship involved was not identified by the agency.
These attacks signify a significant escalation in the conflict, representing the first direct assaults on oil tankers in the Red Sea. This waterway has become crucial for Saudi Arabia’s crude exports, enabling shipments to bypass the congested Strait of Hormuz, a vital oil transit route. The recent strikes have heightened concerns about tighter global oil supplies, contributing to a surge that has already lifted Brent crude by nearly 30% this month.
Analysts caution that if geopolitical tensions continue to rise and supply disruptions worsen, oil prices could reach $100 per barrel once again. The latest attacks have exacerbated tensions in West Asia, propelling Brent crude above $95 per barrel, a level that could adversely affect market sentiment in India. The reliance on imported crude makes elevated oil prices a significant macroeconomic risk, potentially impacting inflation and external balances.
