Oil prices are on the rise on Wednesday (July 22), with Brent crude climbing nearly 4% to surpass $94 per barrel, while WTI crude advances 3.8% to reach $88 per barrel. This sharp uptick comes in the wake of new US military strikes against Iran, reigniting fears over the Strait of Hormuz and the Red Sea, as Houthi activity in the region continues to threaten global energy supplies.
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Rubio’s statements and market fears over global energy security
US Secretary of State Marco Rubio stated that the Strait of Hormuz remains the central point of contention between Washington and Tehran, keeping market anxiety over global energy security at elevated levels. According to Rubio, the United States remains willing to negotiate an end to the conflict with Iran; however, he noted that Tehran is not taking the bilateral talks seriously. “The problem we face right now is that they are not serious about the talks. If they are serious, so are we. If they are not, then we will do whatever is necessary to protect our interests and the interests of our allies,” the US Secretary of State said pointedly from Manila, on the sidelines of a Southeast Asian foreign ministers’ meeting.
At the same time, the renewed flare-up in the US-Iran conflict is raising concerns about two of the world’s most critical energy chokepoints: the Strait of Hormuz and the Bab el-Mandeb strait in the Red Sea. Notably, the latest surge in energy prices has also led investors to increase their bets that the US Federal Reserve (Fed) will maintain a more aggressive monetary policy stance and may proceed with further interest rate hikes.
Fears over the Strait of Hormuz and Bab el-Mandeb in the Red Sea
According to the United States, Iran has carried out more than 30 attacks on commercial vessels over the past three months, while noting that the Strait of Hormuz remains open. Nevertheless, both markets and insurance companies are increasingly concerned about when these attacks on commercial shipping will come to an end.
Concerns are simultaneously spreading to the Red Sea, as Yemen’s Houthi rebels — backed by Iran — have threatened to target vessels carrying Saudi Arabian oil through the Bab el-Mandeb strait. It is worth noting that three tankers transporting Saudi crude changed course in the Red Sea on Tuesday (July 21), following the Houthi announcement of a blockade on Saudi cargo passing through the Bab el-Mandeb.
