Oil retreats after Houthis rule out full Red Sea closure

Brent crude surged above $100 a barrel on July 23 for the first time in two months after Iran-backed Houthi militants attacked two Saudi oil tankers in the Red Sea, opening a new front in the broader Middle East conflict and threatening a second critical shipping chokepoint alongside the already-disrupted Strait of Hormuz.

Attacks Rattle Markets

The Houthis claimed on July 22 that they struck the Saudi-flagged tankers Encelia and Laylia using ballistic missiles, cruise missiles, and drones, citing the vessels' violation of a blockade the group had imposed on Saudi Arabia. Saudi Arabia's Public Transport Authority confirmed the attack on the Encelia on July 23, saying the strike caused a fire at the ship's bow but that the crew was safe. The UK Maritime Trade Operations monitoring body also confirmed a tanker had been hit by an "unknown projectile".nytimes+2

ICE September Brent futures settled up $6.62, or 7%, at $100.69 per barrel on July 23 — the highest close since May 22. West Texas Intermediate crude settled up 6.2% at $92.19. The attacks marked the first Houthi strikes on Red Sea shipping since July 2025.spglobal+2

Dual Chokepoint Fears

The price spike compounded existing supply anxieties. The Strait of Hormuz, which carries roughly 20% of the world's oil and liquefied natural gas, has seen near-halted traffic since the U.S.-Iran conflict began in late February 2026. The Bab el-Mandeb Strait at the southern entrance to the Red Sea — now also under threat — is the second most important oil shipping channel after Hormuz. According to the Associated Press, the attacks came as the U.S. military conducted a 12th night of strikes against Iran.apnews+3

Combined, the two chokepoints handle a substantial share of global seaborne oil trade. According to CNBC, Brent remained on course for a roughly 13.5% weekly advance as of Friday morning trading.cnbc

Pullback on Houthi Signals

Oil prices retreated sharply on July 24 after Houthi spokesman Mohammed Abdulsalam said there would be "no full closure" of the Bab el-Mandeb Strait, characterizing the campaign as "a limited maritime blockade affecting only Saudi Arabia". Brent fell more than 4% intraday on the news, trading at $95.83.sedaily

Bloomberg reported that despite the pullback, analysts see further upside risk. "The path of least resistance continues to point higher," said Chris Weston, head of research at Pepperstone Group. He projected Brent could reach $110 unless "we see a meaningful shift toward two-way negotiations and a clear path" to peace. Jay Hatfield, CEO of Infrastructure Capital Management, warned that if Red Sea traffic remains minimal, oil could reach $120.energyconnects

China, Iran's largest oil buyer, has been pushing diplomatic efforts, with Foreign Minister Wang Yi urging all parties against a "return to the use of force". But analysts remain skeptical of Beijing's leverage over the warring parties.china-mission+2