Brent crude futures dipped 0.7% to $99.97 in early Asian trading on Friday as traders locked in profits following Thursday's sharp rally. However, the modest retreat does little to mask the underlying supply threats that have driven a 13.5% weekly gain for the global benchmark, its largest such advance in months. U.S. West Texas Intermediate similarly eased to $91.49, yet remains up 10.9% for the week.
Weekly Rally Reflects Deepening Disruptions
Thursday's 7% surge in Brent—which pushed the contract above $100 for the first time since May—was triggered by Houthi claims of attacks on two tankers carrying Saudi crude in the Red Sea. The incident heightened fears over the Bab el-Mandeb Strait, a critical chokepoint for oil shipments. The sustained weekly advance suggests traders are pricing in a higher probability of physical supply losses, longer voyage times, and escalating freight and insurance costs.
“The noose around global energy supply routes is pulling tighter again,” noted Tony Sycamore, market analyst at IG, in a research note. The Strait of Hormuz, already under severe strain from renewed U.S.-Iran hostilities, now faces compounding pressure as the alternative corridor through the Red Sea comes under threat.
Red Sea Attacks Compound Hormuz Crisis
Saudi Arabia has increasingly relied on its East-West pipeline to bypass the Strait of Hormuz, moving crude to Red Sea ports for export. But the Houthi attacks now jeopardize that escape route. Tankers must traverse the Bab el-Mandeb to reach Asian buyers or take longer routes toward Europe, adding costs and delays.
Ellen Fraser, energy analyst at Baringa, described the situation as a “double hit” in comments to The Wall Street Journal. She warned that the disruptions could reduce Middle Eastern exports while forcing Europe-bound cargoes around southern Africa, lengthening journeys and raising costs. “Prices could rise further unless tensions ease,” she added.
The risk extends beyond direct barrel losses. Shipping companies may reroute vessels, suspend sailings, or demand higher insurance premiums, tightening prompt supply availability before producers can adjust output. While two Chinese supertankers carrying four million barrels of Saudi crude successfully transited the Bab el-Mandeb on Thursday, isolated crossings do not eliminate the risk of a broader retreat by shipowners.
Kazakhstan Adds Another Supply Shock
The Middle East is not the market's only headache. Kazakhstan's oil production has fallen sharply after suspected Ukrainian drone attacks forced the Caspian Pipeline Consortium to halt loadings at its Black Sea terminal—a route handling roughly 2% of global daily crude supply. Output dropped to about 1.63 million barrels per day from a July average of 2.07 million, with production at the Chevron-led Tengiz field more than halving to around 406,000 barrels per day.
Bob Yawger, director of energy futures at Mizuho, told Reuters that pressure across two major chokepoints has brought crude within reach of the four-year high of $126.41 as available supplies shrink. Goldman Sachs retained its fourth-quarter base case of $80 per barrel but acknowledged that Brent could exceed $120 if Hormuz disruption persists and risks spread across Bab el-Mandeb and the Suez route.
For investors, the weekly rally serves as a stark reminder that the market is grappling with overlapping, structural supply threats rather than a temporary geopolitical spike. The danger, as the data shows, is not fading.
This article is for informational purposes only and does not constitute financial advice.
