Houthi armed forces intervene, Brent oil spikes to $120! The Red Sea route is feared to follow in the footsteps of the Strait of Hormuz.

Notice that, as Iran-backed Houthi militia groups from Yemen intervene in the Middle East conflict, coupled with more US military arriving in the region, oil prices have risen, sparking concerns in the market about the further chaos that the conflict expanding will bring to the energy market. Brent crude oil is expected to achieve its largest monthly increase in history. Last weekend, Houthi militants launched missiles towards Israel and declared they will continue their actions until the attacks against Iran and its proxy armed groups cease, causing Brent crude oil to surge over 3% to reach $116.43 per barrel. WTI crude oil also jumped to over $100. Although the militia group has not explicitly stated that they will target ships passing through the southern Red Sea and the Strait of Mandeb, they have the capability to do so. With the key Strait of Hormuz effectively closed due to the war, Saudi Arabia is using its Yanbu export port to export some oil, and this port is well within the range of Houthi missile attacks. Brent crude oil expected to set monthly record increase CEO of XAnalysts Pty, Mukesh Sahdev, said that the threat of Houthi militants to "Saudi oil infrastructure and shipping channels through the Red Sea, is like rejecting the 'bypass surgery' meant to alleviate the 'heart attack' of the closure of the Strait of Hormuz, and this surgery originally functioned well." Since March of this year, due to the war between the US, Israel, and Iran disrupting the global market and causing concerns about skyrocketing inflation and slowing growth happening simultaneously, Brent crude oil prices have surged by over 50%. The conflict is now in its fifth week, despite diplomatic mediation from Washington last week, and separate peace talks held in Pakistan over the weekend, the situation remains tense. Iran has cut off most of the shipping passing through the Strait of Hormuz. Tehran has taken action to regularize control of this waterway, prohibiting most vessels from passing through and only allowing a few ships, including those from Pakistan, Thailand, and Malaysia, to pass. The intervention of Houthi militia has brought new risks to the oil market. Following the Gaza War in 2023, this group forced most Western shipping companies to avoid the Red Sea and take detours. Now, any threats against goods loaded at the Saudi Yanbu port will further restrict supply. Riyadh has been increasing exports through the Red Sea to buffer the supply impact. Chief Investment Officer Harris Koulshid of Chicago-based Karobaar Capital LP stated that the actions of Houthi militants "add upside risk primarily through shipping and the Red Sea route." But he added: "Unless it affects a broader range of Gulf infrastructure or the flow of the Strait of Hormuz, this is more a volatility issue than a real supply shock." Major banks are urgently calculating the direction in which the conflict and its prices may evolve. Last week, Macquarie Group stated that if the conflict drags on until June and the Strait of Hormuz remains closed, in a scenario with a 40% probability, futures prices could reach $200 per barrel. The spot price difference of Brent crude oil presents a bullish pattern of "spot premium," reflecting the market's high level of concern about near-term supply, with the prices of near-month contracts much higher than those of the next month. This difference exceeded $7 per barrel on Monday, while in the week before the outbreak of war, the two prices were almost the same. The US has ordered thousands of soldiers to go to the region, exacerbating concerns about high-risk ground invasions. Media reports citing US officials stated that the Pentagon is preparing for a weeks-long ground operation in Iran, but senior government officials, including Secretary of State Pompeo, have downplayed the likelihood of such action. The conflict has also affected other industries. Last weekend, Emirates Global Aluminium in the UAE suffered "significant damage" from Iranian missile and drone attacks on Saturday. Additionally, a facility of Aluminium Bahrain was also attacked.