Oil Prices Surge as Yemen's Houthi Attacks on Saudi Tankers

Oil prices climbed to their highest level in over a month on Thursday and extending gains for a fifth straight day. The rally follows an announcement from Yemen's Houthi rebels that they had struck two Saudi oil tankers with stoking fears that supply disruptions could spread beyond the Strait of Hormuz.

Brent crude rose nearly 5% to $98.59 a barrel, its highest since June 3, while U.S. WTI crude gained close to 4% to reach $90.22, its highest since June 11. Analysts say markets are now pricing in the risk of disruptions at a second major chokepoint, beyond Hormuz.

The Houthis have opened a new front by targeting Saudi oil vessels in the Bab el-Mandeb strait and attempting to enforce a naval blockade on Saudi Arabia. Despite the threat the two Chinese supertankers carrying a combined 4 million barrels of Saudi oil exited the Red Sea through the strait on Thursday. Goldman Sachs estimates that nearly 9 million barrels per day pass through Bab el-Mandeb monthly with about 4 million bpd difficult to reroute if the chokepoint closes.

Iran's Revolutionary Guards reported that a tanker caught fire after an explosion on a mined route near Oman in the Strait of Hormuz and said two other vessels turned back. Iran claims the strait is now under its control and closed to traffic without coordination.

The U.S. military confirmed a twelfth consecutive night of strikes on Iran after President Trump warned of retaliatory strikes on Iranian infrastructure for any future attacks on shipping.

Goldman Sachs expects oil prices to hold most of their gains through summer also driven by falling inventories with reduced Middle East output and seasonal demand. Separately, European diesel margins hit a record high with pushed up by Russia's export ban following Ukrainian attacks on its refineries.