US President Donald Trump vows to punish Iran for Houthi attacks in Red Sea
US President Donald Trump said that the US would hold Iran responsible for the Houthis’ actions and warned that Iran and its Houthi allies would both soon receive a “major military punishment,” Reuters reported on Thursday.
The remarks came after Yemen’s Iran-backed Houthi rebels struck two Saudi oil tankers in the Red Sea, extending the Middle East war to a second major shipping chokepoint.
Earlier this week, the Houthis said that they were imposing a naval blockade on Saudi Arabia, which has diverted millions of barrels of oil per day by pipeline to the Red Sea to get around Iran's blockade of Gulf oil through the Strait of Hormuz.
Market reaction
Crude oil prices attract some buyers following these headlines. At the time of writing, the West Texas Intermediate (WTI) is up 5.65% on the day at $90.77. Brent crude oil climbs more than 6%, breaking through $100 a barrel for the first time since May.
Brent Crude Oil FAQs
Brent Crude Oil is a type of Crude Oil found in the North Sea that is used as a benchmark for international Oil prices. It is considered ‘light’ and ‘sweet’ because of its high gravity and low sulfur content, making it easier to refine into gasoline and other high-value products. Brent Crude Oil serves as a reference price for approximately two-thirds of the world's internationally traded Oil supplies. Its popularity rests on its availability and stability: the North Sea region has well-established infrastructure for Oil production and transportation, ensuring a reliable and consistent supply.
Like all assets supply and demand are the key drivers of Brent Crude Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of Brent Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of Brent Crude Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact Brent Crude Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
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