Brent crude oil, the international benchmark, touched $99 per barrel on Tuesday after Saudi Arabia reported an attack on energy infrastructure that caused temporary operational pauses. U.S. crude oil also rose by more than 2.5% to nearly $94 per barrel, while wholesale gas prices increased 1.4%. The state-run Saudi Press Agency attributed the attacks to the Houthis, characterizing them as terrorist actions.
The attacks resulted in 73 civilian injuries, according to Saudi officials. Saudi Arabia also condemned Houthi attacks on commercial vessels in the Red Sea and their threats to international maritime navigation. As the world's largest oil exporter, Saudi Arabia's infrastructure disruptions have immediate global market implications.
The escalation follows U.S. strikes on three Iranian oil tankers on Sunday, which resulted in the sinking of one vessel. These strikes were conducted after Iran launched ballistic missiles toward U.S. Navy ships.
The renewed hostilities have significantly impacted traffic through the Strait of Hormuz, a critical chokepoint for global energy supplies. Before the current conflict, the strait carried more than 20% of the world's energy supply. On Saturday and Sunday, only four and six vessels respectively passed through the waterway, representing a dramatic decline from normal traffic levels.
Vessel traffic in the Bab el Mandeb strait, situated between the Arabian Peninsula and northeastern Africa, experienced a 16% decline in transits from the previous week, though overall traffic of more than 260 ships remained significantly higher than Strait of Hormuz levels. The national average U.S. gas price remained at $4.15 per gallon on Tuesday, unchanged from Monday but up 6 cents from one week prior and 14 cents from one month ago. Diesel fuel reached $5.90 per gallon on Saturday and has remained at that level since the weekend, following its all-time high recorded on Friday.
Since the war began, Brent has risen 36%, and the national average gas price has increased 40%. From the start of the year, Brent crude prices are up more than 62%. Financial analysts have raised concerns about further price escalation.
Goldman Sachs commodities analysts warned of significant upside risk to prices, forecasting that if Persian Gulf oil flows remain low, Brent could exceed $120 per barrel. They identified more intense shipping attacks in Hormuz and the Red Sea as the most likely driver of this higher-price scenario. HSBC's analysts similarly suggested that if diplomacy fails and Hormuz flows remain near current levels, inventories could decline toward operational minimums and Brent could rise to around $120.
HSBC's current base case forecasts Brent hovering around $95 through the end of the year. However, their forecast for Brent has been revised to $85 per barrel for 2027 and $75 per barrel for 2028 and beyond. Before the U.S. and Israel launched military action against Iran on February 28, Brent traded around $70.
Global crude oil inventories have been drawn down rapidly following a coordinated release of 400 million barrels agreed upon in early March by governments and the International Energy Agency to address elevated prices. President Donald Trump stated on Monday that oil prices would drop precipitously once the war with Iran is won, claiming prices could fall as low as two dollars per gallon. Higher oil prices have contributed to increased bond yields, with the benchmark 10-year yield reaching nearly 4.80% on Tuesday, its highest level since early the previous week.
Sources: NBC News, Saudi Press Agency, MarineTraffic, American Automobile Association (AAA), Goldman Sachs, HSBC
Source: nbcnews.com