Brent crude hit an over five-month high on Thursday after Iran-backed Houthis attacked Saudi Arabian energy infrastructure and airports. A report of possible new U.S. and Israeli strikes on Iran added to supply worries. One analysis argues the market is pricing the risk to supply routes, not lost barrels.
Brent crude futures jumped 4% to $113.14 a barrel, their highest level since early May, as fresh Houthi attacks on Saudi Arabian energy infrastructure and airports stoked supply disruption fears.
U.S. West Texas Intermediate futures rose 2.2% to $99.31 a barrel. Moreover, a media report that the U.S. and Israel were looking to ramp up military strikes against Iran after the U.S. midterm elections in November clouded the mood.
Houthis target Saudi sites
According to a statement posted by the Houthis, four military operations over the past 48 hours hit Saudi Arabian targets, including the Ministry of Defense building in Riyadh, a Saudi Aramco site in Yanbu and two separate airports. Reuters also reported that Aramco told staff to evacuate its headquarters in Dhahran.
However, the damage to supply appears limited so far. The Saudi Energy Ministry said a drone targeted the Shaybah plant, but operations at the field, which produces 1 million barrels a day, were not affected.
An Investing.com analysis therefore argues that the oil market is pricing a geography risk, not a supply loss. In its view, the attacks justify a risk premium of several dollars because the routes carrying Gulf barrels around Hormuz are now targets.
Iran warns of retaliation as tankers burn
Meanwhile, Iran warned of bitter retaliation against any new U.S. hostilities, including attacks on Saudi oil refineries, data centers and undersea internet cables. The country has ramped up its attacks on shipping through the Strait of Hormuz in recent weeks.
Overnight, seven oil tankers caught fire or were damaged in the strait after hitting naval mines or attacks by Iran, according to the Associated Press, citing Iranian state television.
Sources: Investing.com, Investing.com analysis
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