Brent Hits $94 as Houthis Ban Israeli Ships in Red Sea

Brent crude oil surged past $94 a barrel on Monday after Yemen's Houthi movement announced a complete ban on Israeli shipping in the Red Sea, escalating tensions along a critical energy corridor. The move adds a geopolitical risk premium to crude, as the Red Sea is a vital chokepoint for global oil trade. Brent crude futures for June delivery rose 2.3% to $94.12 a barrel, while West Texas Intermediate (WTI) crude climbed to $89.80, widening the Brent-WTI spread to over $4 as Brent is more exposed to Red Sea disruptions. The Houthi declaration directly threatens the Red Sea route, which has become increasingly vital for global oil trade as Saudi Arabia relies on its East-West Pipeline and the Yanbu terminal to bypass the Strait of Hormuz. Any disruption to Red Sea shipping could force tankers to take longer, costlier diversions around the Cape of Good Hope, tightening supply and boosting prices. For fuel traders, this development adds a significant risk premium to crude, as the Red Sea now handles a growing share of Middle Eastern exports. The crack spread—the difference between crude oil and refined product prices—has widened, with diesel and jet fuel margins rising sharply as refineries face higher input costs. Meanwhile, OPEC+ spare capacity remains concentrated in Saudi Arabia and the UAE, estimated at around 4-5 million barrels per day, but bringing that oil to market would take weeks, leaving the market vulnerable to short-term shocks. The U.S. Strategic Petroleum Reserve (SPR) stands at about 370 million barrels, near a 40-year low, limiting Washington's ability to intervene. China's marginal demand for crude remains tepid, with refinery runs flat year-on-year, but any Red Sea disruption could still tighten global balances. Saudi-Russia coordination remains intact, with both producers likely to maintain output cuts to support prices. Check NowPrice's fuel page for the latest Brent and WTI pricing.

Markets will now watch for any retaliatory military action or diplomatic efforts to de-escalate. The immediate focus is on whether insurance rates for Red Sea transits spike further and if Saudi Arabia can maintain export flows through alternative pipelines. The contango structure in Brent futures has flattened, suggesting traders are pricing in near-term tightness, while backwardation has steepened for nearby contracts. Any sustained disruption could push Brent toward the $100 mark, depending on the duration and scope of the ban. Traders are also monitoring the potential for Houthi attacks to spread to other vessels, which could force a broader rerouting of tankers and further strain shipping capacity. The key risk is that the ban persists for weeks, draining inventories and forcing refiners to bid up for alternative supplies. A diplomatic resolution, possibly brokered by Oman or the UN, could quickly reverse the risk premium, but until then, the market remains on edge.