Brent gains on Red Sea escalation fears

The front-month ICE Brent contract has gained by $0.87/bbl on the day, to trade at $85.11/bbl at 09.00 GMT.

IMAGE: Oil pumpjack. Getty Images

Upward pressure:

Brent’s price has jumped back above the $85/bbl mark following fresh threats from Iran to broaden the regional conflict to the Red Sea and the Bab al-Mandeb Strait.

Iran has instructed Yemen-based Houthi militants to prepare attacks on the Bab al-Mandeb Strait, if the US strikes Iran’s power infrastructure, Reuters reported.

Bab al-Mandeb is another vital oil chokepoint like the Strait of Hormuz, carrying about 7% of global seaborne oil flows.

Any new attacks in the region threatens to deepen the global energy crisis, as traffic through the Strait of Hormuz is already facing severe disruption.

“Oil prices continue to move higher, with neither the US nor Iran showing any real intent to dial down the latest surge in tensions,” two analysts from ING Bank noted.

Downward pressure:

Brent’s rally was partially capped after US President Donald Trump cancelled plans to impose a 20% fee of a cargo’s value for the US to assist in safely transiting the Strait of Hormuz.

Trump has pivoted from his earlier proposal, focusing instead on forging new trade deals with Gulf countries.

By Aparupa Mazumder

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