Oil supported by growing Middle East tensions
Brent crude’s price remains supported as hostilities in the Middle East continue to intensify.
IMAGE: Getty Images
The Israel Defense Forces (IDF) hit a petrochemical plant in southwestern Iran yesterday, making the first direct attack on the latter’s energy facility since the 8 April ceasefire.
"These facilities [in Mahshahr, in southwestern Iran] were used by the armed forces of the Iranian terror regime to produce and export raw materials for weapons production," the IDF said on social media platform X.
Both countries exchanged fire over the weekend after Israel struck a Hezbollah-controlled command centre in Beirut, Lebanon.
The escalation triggered a jump in Brent crude’s price, with market analysts increasingly sceptical about the viability of the ongoing US-Iran negotiations.
Meanwhile, global energy markets face renewed volatility after Yemen-based Houthi militants moved to block all Israel-linked vessels in the Red Sea. The group has also claimed responsibility for airstrikes near Tel Aviv.
“We declare a complete and total ban on Israeli maritime navigation in the Red Sea, and we consider all enemy movements to be legitimate military targets,” Houthi spokesperson Yahya Saree announced on social media platform Telegram.
The escalation risks paralysing another major export artery and expanding the maritime conflict well past the Strait of Hormuz. Notably, Saudi Arabia has relied heavily on its East-West Pipeline and Red Sea export terminal at Yanbu to keep crude flowing to global markets.
“The Saudis have used their East-West pipeline to export more than 4mb/d [4 million b/d] via its Yanbu port in the Red Sea,” ANZ Bank’s senior commodity strategist Daniel Hynes noted.
Earlier in April, senior Houthi officials had threatened to close a third key export route in the region – the Bab al-Mandeb Strait – if the US-Israel conflict against Iran continued.
With the global oil market already struggling to adapt to the Hormuz bottleneck, any further Houthi expansion near the Bab al-Mandeb will significantly heighten supply risks, according to market analysts.
“While there is some conjecture over what constitutes an Israeli vessel, it raises risk around one of the key alternative routes [Bab al-Mandeb Strait] for Saudi Arabian crude oil to make its way onto the international market,” Hynes said.
By Aparupa Mazumder
Please get in touch with comments or additional info to news@engine.online
