Oil Rallies 16% as Hormuz and Red Sea Risks Threaten Supply — NRG-IA

Brent crude settled Friday's session at $88.10 per barrel, up $3.87 or 4.59% from the previous level. The US benchmark West Texas Intermediate rose 4.48% to $82.49 per barrel. Both benchmarks gained approximately 16% in a single week, reaching their highest levels since mid-June. The rally does not merely reflect the intensifying military confrontation between the United States and Iran. The market is beginning to price in the possibility that two maritime corridors essential to Middle Eastern energy could be disrupted simultaneously: the Strait of Hormuz, the primary exit from the Persian Gulf, and the Red Sea, which has become an increasingly vital alternative route following the redirection of Saudi exports. This shift explains the scale of the price movement. Risk is no longer concentrated in a single strait; it is beginning to follow oil along the very route chosen to bypass that chokepoint. In Hormuz, disruption is already visible in vessel traffic Only three commercial cargo vessels transited the Strait of Hormuz on Thursday, the lowest daily figure recorded since May. The previous day saw 11 vessels cross, compared to a pre-war average of approximately 125 daily transits. For the second consecutive day, no supertankers or liquefied natural gas (LNG) carriers were observed transiting the strait. The data points to a physical disruption of flows, not just an emotional reaction in financial markets. Some vessels have halted in the Gulf of Oman, others have reversed course, and operators must simultaneously assess military risk, crew availability, naval protection, insurance costs, and the possibility that a voyage, once started, cannot be completed. Prior to the conflict, Hormuz carried approximately one-fifth of global oil flows. About 20% of global LNG trade, primarily from Qatar, also transited the same strait. In 2024, roughly 83% of the liquefied natural gas transiting the route was destined for Asian markets. A complete and permanent closure is not required to produce major economic impacts. Reduced transit volumes, attacks on vessels, turnbacks, and owners' refusal to enter the area can curtail deliveries even if the strait formally remains open on the map. Saudi Arabia has shifted a large share of exports to the Red Sea To bypass Hormuz, Saudi Arabia has utilized the pipeline transporting crude from the east of the country to the port of Yanbu on the Red Sea coast. Over 70% of regular daily Saudi exports have been redirected to this port since the outbreak of the conflict. Deliveries from Yanbu have reached approximately four million barrels per day in recent weeks, compared to less than one million barrels per day during the same period last year. The total volume of petroleum products transported through Bab el-Mandeb rose in June to approximately 7.4 million barrels per day, equivalent to about 7% of global oil production. This redirection has helped the market offset some of the losses caused by the contraction of traffic through Hormuz. The pipeline to Yanbu has functioned as a strategic safety valve: Saudi oil has been able to reach the sea without crossing the Persian Gulf and the area controlled by Iran. However, the success of this solution has concentrated increasingly large volumes into a second sensitive corridor. The more oil is shifted to the Red Sea, the more critical the security of the port of Yanbu, regional navigation, and access through Bab el-Mandeb becomes for the global market. The Houthi threat shifts the risk map, without yet meaning a closure According to three sources cited by Reuters, the Iranian leadership has asked the Houthi movement in Yemen to be prepared to shut down the Red Sea oil route if the United States attacks Iran's power infrastructure. A source close to the group stated that missiles and drones had reportedly been deployed near the Bab el-Mandeb area and that forces were awaiting orders to act. The information has not been publicly confirmed by the Iranian Foreign Ministry or a Houthi spokesperson, and the Yemeni movement had not formally entered the confrontation between Washington and Tehran at the time of the report. The threat must therefore be treated as a source-documented risk, rather than an official closure decision already implemented. However, the Houthis' capacity to disrupt shipping is not hypothetical. Attacks launched since 2023 have prompted major shipping companies to avoid the Red Sea and reroute vessels around Africa, a longer and more expensive route. Even a limited number of attacks can lead operators and insurers to reclassify the entire corridor as a high-risk zone. The market does not only price in events that have occurred, but also the probability of those that might follow. Friday's rally shows that the possibility of an escalation into the Red Sea has become credible enough to immediately influence oil prices. Hormuz and Bab el-Mandeb do not play the same role The Strait of Hormuz is the direct maritime exit for oil and…