Brent Crude Breaks $90 as Middle East Shipping Risks Widen

Key Takeaways

• Brent crude briefly climbed above $90 a barrel as renewed disruption in the Strait of Hormuz intensified concerns about global oil supplies.
• A Houthi-declared maritime blockade against Saudi Arabia raised the possibility of additional shipping disruption near the Bab el-Mandeb strait.
• US petrol prices returned above $4 a gallon, increasing concerns that higher energy costs could add to inflationary pressure.
• Oil later moved below its session high as markets assessed reports of a possible 10-day ceasefire proposal between the US and Iran.

Oil prices rose sharply on Monday, 20 July, as escalating security risks around two of the world’s most important maritime trade routes increased concerns about the availability of crude supplies.

Brent crude briefly traded above $90 a barrel, reaching its highest level in more than a month. Prices subsequently retreated as diplomatic activity offered some hope that the latest escalation between the United States and Iran could be contained.

Early on Tuesday, Brent futures stood at approximately $88.87 a barrel, while West Texas Intermediate remained near $82.47. Both benchmarks were still trading close to their recent highs despite the modest pullback.

Why Did Oil Prices Rise Above $90?

The latest oil price rally was largely driven by fears that disruption in the Strait of Hormuz could become more severe or last longer than previously expected.

Recent attacks on commercial vessels, continued exchanges between US and Iranian forces and uncertainty surrounding the regional security situation have reduced normal shipping activity through the strait. Traders are increasingly focused on whether the disruption will prevent more Gulf producers from delivering crude to international buyers.

WTI also remained above $82 a barrel, reflecting the broader increase in the geopolitical risk premium attached to global energy markets. Although the United States is less dependent on imported Middle Eastern crude than many Asian and European economies, WTI is still influenced by changes in international supply, transport costs and refined-product availability.

Strait of Hormuz Disruption Remains the Main Supply Risk

The Strait of Hormuz is the narrow shipping channel connecting the Persian Gulf with the Arabian Sea. Before the current conflict, approximately 20% of global oil supplies passed through the waterway.

Saudi Arabia, the United Arab Emirates, Kuwait, Iraq and Qatar all depend on the route for at least part of their energy exports. The strait is also particularly important for liquefied natural gas shipments from Qatar.

Even without a formal and complete closure, repeated vessel attacks can disrupt energy flows. Shipping companies may delay departures, redirect vessels or demand stronger security arrangements. Insurance costs can also rise when underwriters view a route as carrying a greater risk of damage, seizure or military confrontation.

These additional costs can feed into crude prices before any physical shortage becomes visible. The market therefore remains highly sensitive to reports concerning tanker movements, port activity and attacks near the waterway.

Houthi Blockade Threat Opens a Second Shipping Front

Supply concerns expanded beyond the Persian Gulf after Yemen’s Iran-aligned Houthi movement announced a maritime blockade against Saudi Arabia.

The declaration threatens shipping near the Bab el-Mandeb strait, which connects the Red Sea with the Gulf of Aden. It is a major route for cargo travelling between Asia and Europe through the Suez Canal.

The Saudi-led coalition described the announcement as a violation of international law and said it had begun implementing protective measures for commercial vessels. However, it remains uncertain whether the Houthis will attempt to enforce the blockade through direct attacks.

A complete closure of Bab el-Mandeb could affect oil exports and force more vessels to take the much longer route around southern Africa. Reuters estimated that a full closure could disrupt flows equivalent to as much as 7% of global oil supply, adding to the existing reduction caused by the Iran conflict.

The possibility of simultaneous disruption in the Strait of Hormuz and Bab el-Mandeb is particularly significant. Together, the two waterways provide access to major Gulf producers and the Suez Canal, making them central to the movement of crude oil, refined fuels and other commodities.

US Petrol Prices Return Above $4 a Gallon

The effect of higher crude prices is already becoming visible at US petrol stations.

Petrol prices had previously fallen below $4 after an interim agreement between Washington and Tehran reduced fears of prolonged supply disruption. Renewed fighting and tighter energy flows have since reversed part of that decline.

Low US fuel inventories have added to the pressure. Petrol stocks recently stood at 210.5 million barrels, approximately 1.5 million barrels below their five-year average.

Persistently, high fuel prices could have wider economic effects. More expensive transport raises costs for households and businesses, while higher freight and production expenses can feed through to consumer prices. This may complicate the inflation outlook and influence expectations for Federal Reserve interest-rate policy.

Ceasefire Reports Limit Further Oil Price Gains

Despite the escalation, oil prices moved below their Monday highs after reports emerged that Iran had received a proposed 10-day ceasefire plan from mediators.

The proposal was reportedly intended to revive the interim agreement reached in June. It remains unclear whether the US and Iran are prepared to accept the terms or whether the negotiations will produce a lasting reduction in hostilities.

The market reaction shows that oil prices are currently being influenced by two opposing forces. Physical disruption and military escalation support prices, while ceasefire discussions and the possibility of restored shipping flows limit the upside.

Until there is clearer evidence of de-escalation, sharp price movements may continue as traders respond to military developments, diplomatic statements and changes in vessel activity.

What Could Move Oil Prices Next?

The immediate outlook will depend heavily on whether shipping conditions improve in the Strait of Hormuz and whether the Houthis take action against Saudi-linked vessels near Bab el-Mandeb.

Markets will also monitor the proposed ceasefire, US and Iranian military activity, tanker insurance costs and weekly US inventory data. A sustained decline in crude and petrol stocks could reinforce supply concerns, while signs of restored Gulf exports may reduce some of the geopolitical premium.

Brent’s ability to remain above $90 may therefore depend on evidence of additional physical disruption. If diplomatic talks progress and tanker traffic begins to recover, oil could surrender part of its recent advance. Further vessel attacks or a wider Red Sea blockade, however, could renew upward pressure.