Oil Prices Hit Five-Month High as Saudi Attacks Threaten Supply
Brent crude rose 3% to $112 a barrel after Houthi strikes in Saudi Arabia and IRGC claims of tanker hits near the Strait of Hormuz
By AXY Business Desk ·
Key points
- Brent crude rose 3% to $112 a barrel on Thursday, its first time at that level since 18 May.
- Houthi attacks in Saudi Arabia killed two people at a civilian airport in Dammam and two more in a drone attack on a Saudi oilfield.
- The IRGC said it hit four vessels in the northern Gulf and that three more struck mines west of the Strait of Hormuz.
- Reuters reported that the US has ordered some diplomats and family members out of Saudi Arabia, and Saudi Aramco has told staff to evacuate its Dhahran headquarters.
Oil prices jumped to a five-month high on Thursday, with Brent crude, the international benchmark for oil prices, rising 3% to $112 a barrel for the first time since 18 May. The move followed attacks in Saudi Arabia and hits on tankers in the Strait of Hormuz, which threatened further disruption to the world's crude supply. For drivers, airlines and anyone who buys goods that travel by ship, the central question is how long the spike lasts.
Brent is the price most of the world's crude is measured against. When it moves sharply, the effect tends to reach petrol stations, airlines and freight companies quickly. A jump of this size suggests that traders now see a real risk of barrels being lost, not just short-term noise in the market.
Houthi Strikes Reach Dammam Airport and a Saudi Oilfield
The latest escalation began on Wednesday, when Yemeni Houthis, a group aligned with Iran, hit several targets in Saudi Arabia. At a civilian airport in Dammam, two people were killed and eight more were wounded. In a separate drone attack on a Saudi oilfield, two people were killed.
The Houthis are based in Yemen, and their strikes place Saudi Arabia, one of the world's major oil producers, directly in the line of fire. The attack on an airport matters for a different reason. It shows the fighting reaching ordinary public places, where travellers and workers go about their day without any role in the conflict.
For energy markets, the strike on an oilfield raises a harder question. Oil only reaches buyers if wells, pipes and export facilities keep running. Any attack that forces a field to slow or stop reduces the supply that the market had been counting on.
Tanker Hits and Mines Near the Strait of Hormuz
Iran's Islamic Revolutionary Guard Corps, known as the IRGC, is a branch of the Iranian armed forces. It said its forces had hit four vessels in the northern Gulf on Wednesday. According to the IRGC, those ships were involved in "illegal" oil transfers, and they were hit and caught fire after being tracked by its forces.
The IRGC also said three more vessels had collided with mines west of the Strait of Hormuz. A mine is an explosive device placed in water, and it can damage or sink a ship that strikes it, even long after the area was first used.
The Strait of Hormuz is a narrow waterway at the mouth of the Gulf that links the Gulf to the open sea. Crude and fuel from Gulf producers must pass through it to reach buyers in Asia, Europe and elsewhere. When a tanker is hit, catches fire or is delayed there, barrels leave the market, and the risk of sailing the route rises for owners, crews and insurers.
The IRGC went further than describing the ship strikes. It warned the United States that continued provocations could lead to a wider response against its regional bases. That warning moves the dispute away from the water and the oilfields and toward American installations across the region, which is why it has drawn so much attention.
US and Saudi Aramco Pull Staff Back
Reuters reported that the United States has ordered some diplomats and their family members to leave their missions in Saudi Arabia. A mission is the term for an embassy or consulate, the offices a government uses to conduct diplomacy abroad. Reuters also reported that the US plans to withdraw family members from a number of other missions in the Middle East.
The same agency reported that Saudi Aramco, the Saudi state oil company, has instructed staff to evacuate its headquarters in Dhahran and work remotely. Aramco is one of the largest oil companies in the world, so a decision to empty its headquarters is closely watched.
These steps are practical, but they also send a signal. When governments send families home and a major oil company tells its office staff to leave, they are preparing for the situation to get worse before it improves. Markets tend to read that kind of preparation as a sign that the risk is not expected to fade quickly.
How Oil Got Back to $112
The current spike sits on top of a very volatile year. In the first weeks after the US-Israeli attacks on Iran, oil surged past $100 a barrel. Market observers at the time predicted prices of up to $150 a barrel as flows through the Strait of Hormuz came to a halt.
That fear was tied to Tehran's effective block on the strait. Almost eight months after that block began, the market is still living with its consequences. Many had feared it would bring the greatest energy supply disruption in the history of the market.
Prices did not stay at the top. Oil peaked at $126 a barrel in April during the conflict, then fell back below $100 in late May. By the start of July it had dropped to lows of $71 a barrel, as hopes grew for a ceasefire in the region.
The recovery began after a memorandum of understanding between the United States and Iran fell apart and fresh hostilities broke out in the Gulf. A memorandum of understanding is a written statement of shared intentions between governments, usually less binding than a full treaty. When that framework collapsed, the calm that had pulled prices down gave way to renewed fighting, and prices followed.
Why Fuel Bills and Shipping Costs Feel the Shock First
For ordinary households, the most direct link runs through fuel. Crude is the raw material for petrol, diesel and jet fuel. A sustained rise in Brent tends to show up at the pump, in airfares and in the cost of moving goods by road, rail and sea. Freight companies that rely on diesel often pass those costs on to customers, and that is how an oil price on a trading screen can end up in a grocery bill.
Shipping workers are on the front line of this story. Crews on tankers and other vessels working near the Gulf face the risk of strikes and mines. Their employers face higher insurance costs and, in some cases, longer routes to avoid danger. Those pressures can ripple into delivery times and prices for goods far from the Middle East.
For people in the region, the stakes are more personal still. The airport strike in Dammam, the drone attack on an oilfield and the withdrawal of diplomatic families all show that the fighting is affecting daily life, not only the price of oil.
Three Tests for Oil Over the Coming Weeks
The first test is whether the IRGC's warning turns into action against US bases in the region. A strike of that kind would widen the conflict beyond shipping lanes and oilfields. It would also make further diplomatic withdrawals more likely, and it could push oil back toward the highs seen earlier in the year.
The second test is whether the withdrawal of diplomats and family members spreads to more missions. Equally important is whether Saudi Aramco's order for staff to work remotely from Dhahran becomes a longer shutdown. Either step would show how seriously governments and companies are taking the risk, and each would be watched closely by traders.
The third test is diplomatic. The collapse of the memorandum of understanding between the United States and Iran removed the ceasefire hopes that had pushed prices down to $71 in the summer. Whether talks can be restored will go a long way toward deciding whether oil stays near $112 or falls back. For now, the market is pricing in the possibility that the conflict keeps spreading.
Questions and answers
Why did oil prices jump to a five-month high?
Brent crude rose 3% to $112 a barrel after Houthi attacks in Saudi Arabia and tanker hits near the Strait of Hormuz raised fears of supply disruption. It was the first time Brent had reached that level since 18 May.
What happened in Saudi Arabia that affected oil markets?
Yemeni Houthis hit several targets in Saudi Arabia on Wednesday. Two people were killed and eight wounded at a civilian airport in Dammam, and two people were killed in a drone attack on a Saudi oilfield.
Why does the Strait of Hormuz matter for oil?
The Strait of Hormuz is a narrow waterway that crude and fuel from Gulf producers must pass through to reach buyers. Vessels hit or delayed there remove barrels from the market and raise risks for shipping crews and insurers.
Why did oil fall to $71 and then rise again?
Oil fell to lows of $71 a barrel at the start of July amid hopes of a ceasefire. The price began to climb again after the memorandum of understanding between the US and Iran fell apart and fresh hostilities broke out in the Gulf.
Topics: Oil prices, Brent crude, Strait of Hormuz, Saudi Arabia, Iran, Houthis, Saudi Aramco
Sources: The Guardian Middle East
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