Oil Prices Breach US$100 as Middle East Conflict Escalates
Global oil benchmarks pushed past the psychologically significant US$100 per barrel mark on Thursday (July 23), as reports of new tanker attacks in the Red Sea and a sharp escalation in the Iran conflict rattled energy markets.
Brent crude, the international benchmark, jumped about 7 percent to settle at US$100.69, touching an intraday high of US$102 — its strongest level since late May. US West Texas Intermediate followed suit, climbing roughly 6 percent to close at US$92.19, its highest finish since early June.
What’s driving the spike?
The immediate trigger was a reported strike on two Saudi oil tankers in the Red Sea, which Yemen’s Houthi rebels claimed as part of a declared naval blockade against Saudi Arabia. The route is a critical alternative for crude shipments given ongoing disruptions in the Strait of Hormuz, where vessel traffic has slowed to a trickle amid the broader US-Iran conflict.
Adding to the pressure, US President Donald Trump threatened further military action against the Houthis, while open-source flight-tracking data pointed to additional American military assets, including refuelling aircraft and strategic bombers, moving into the region.
Crude has now climbed roughly 35 percent since the start of the month and more than 60 percent since the start of the year, unwinding much of the relief markets saw after a preliminary US-Iran agreement in mid-June briefly pushed Brent below US$72.
The energy shock spilled quickly into broader markets. The S&P 500 (INDEXSP:.INX) fell 1.2 percent and the Dow Jones Industrial Average (INDEXDJX:.DJI) dropped more than 500 points, while US Treasury yields rose as investors reassessed the interest rate outlook — CME FedWatch data now shows markets pricing in a much higher probability of a Federal Reserve rate move this month than they were a week ago.
The supply picture was already tightening
Even before this week’s escalation, the underlying data pointed to a market with less cushion than usual. According to the July International Energy Forum (IEF) report, crude production among Joint Organizations Data Initiative (JODI) reporting countries fell by 520,000 barrels per day (bpd) month-on-month in May and by 4.4 million bpd year-on-year, with the monthly decline led by pullbacks in Norway, the US, Canada and the UK, only partially offset by gains from Saudi Arabia and Venezuela.
The steeper annual drop was driven largely by production cuts from Saudi Arabia and Kuwait.
Demand told a mixed story.
Total oil product demand among JODI-reporting countries slipped 1.1 million bpd month-on-month in May, weighed down by weaker consumption in China, Japan, France and Germany, even as the US, Canada, Indonesia and Saudi Arabia posted gains.
Year-on-year, demand was down 4.6 million bpd, with China, South Korea, Germany, Japan, Chinese Taipei and the Netherlands accounting for…
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