Oil prices were on track for a weekly increase on Friday, as assaults by Houthis on tankers in the Red Sea heightened apprehensions regarding a potential closure of another vital shipping corridor. Simultaneously, Kazakhstan implemented a temporary reduction in oil production following the closure of its primary export route. Brent futures declined by 81 cents, or 1%, to $99.68 a barrel at 0126, yet they remain on track for a 13.5% increase this week. West Texas Intermediate futures declined by 70 cents, representing a decrease of 0.76%, settling at $91.49 per barrel, while poised for an 11% increase over the week. On Thursday, Brent settled 7% higher, while WTI experienced a rise of 6.2%. Brent experienced its first closure above $100 a barrel since May, following reports from Iran-aligned Houthis claiming responsibility for attacks on two Saudi oil tankers in the Red Sea.

The attacks have heightened apprehensions regarding the potential closure of the Bab el-Mandeb shipping route. The waterway serves as a crucial link between the Red Sea and the Indian Ocean, ranking as the second most significant oil transit channel globally, following the Strait of Hormuz. U.S. President Donald Trump asserted his intention to “hold Iran responsible” for any additional attacks. The Iran-aligned Houthis announced on Monday their decision to impose a naval blockade on Saudi Arabia. Saudi Arabia had been utilising pipelines to reroute its oil shipments and circumvent the potential closure of the Strait of Hormuz by Iran. Iran had been urging the Houthis to close the Bab el-Mandeb gateway to the Red Sea should the U.S. persist in its assaults on Iranian power infrastructure. The action followed the breakdown of a temporary ceasefire between the U.S. and Iran two weeks prior.

On Thursday, Kazakhstan’s energy ministry announced that oil companies had temporarily reduced production following suspected Ukrainian drone attacks that resulted in the closure of the nation’s primary Black Sea export terminal. The Caspian Pipeline Consortium has ceased oil receipts from Kazakhstan, having suspended loadings in the wake of attacks on tankers at the terminal, as reported by industry sources on Tuesday. The route accounts for approximately 2% of the global daily crude supply. Goldman Sachs has cautioned that Brent crude may rise to $120 a barrel should disruptions to shipping via the Strait of Hormuz, the preeminent oil transit route globally, persist. Its base case remains that tensions in the Middle East will ultimately subside. If the conflict in the region subsides, Goldman Sachs anticipates that Brent will average $80 a barrel in the fourth quarter and $75 in the following year. However, analysts indicated that the risks to these forecasts remain “tilted to the upside,” referencing the potential for disruptions to shipping through both the Strait of Hormuz and the Red Sea. Oil markets have experienced a resurgence of volatility this month, with Brent prices climbing back above $91 per barrel amid escalating hostilities between the U.S. and Iran.

The threat posed by Iran-backed Houthi rebels in Yemen to obstruct Saudi oil shipments has heightened apprehensions. The Red Sea has also gained significance for Persian Gulf crude cargoes impacted by disruptions, enabling them to persist in reaching buyers. Anindya Banerjee, said crude oil prices were once again being driven by geopolitical risks. “Any strike on major Gulf export infrastructure could force a retest of $95-100 and beyond,” he said. Banerjee indicated that the market’s attention has shifted from military strikes to the diminishing likelihood of a diplomatic resolution. Tehran has established new prerequisites for resuming negotiations, he stated, as each subsequent development continues to postpone the restoration of regular tanker traffic through the Strait of Hormuz. Shipping activity through the waterway has consistently stayed below pre-war levels.