Oil prices rose to their highest levels in more than six weeks early Thursday, July 23, after a Saudi-flagged tanker was struck in the Red Sea and the United States and Iran exchanged new threats over attacks on commercial shipping.
September Brent crude futures gained about 2% to $95.99 a barrel, while U.S. West Texas Intermediate rose about 1.7% to $88.27, CNBC reported. The move extended Wednesday's rally and put two crucial oil routes—the Strait of Hormuz and the Bab el-Mandeb Strait—at the center of the market's risk calculation.
The United Kingdom Maritime Trade Operations said a tanker was hit by an unknown projectile roughly 70 nautical miles southwest of Al Shuqaiq, Saudi Arabia. A fire broke out aboard the vessel, but there were no reported casualties. Reuters identified the ship as the Saudi-flagged Encelia based on maritime-security reporting.
What changed
Yemen's Iran-aligned Houthi movement claimed attacks on two Saudi oil tankers, the Encelia and the Layla, as part of a declared blockade of Saudi ports. The Encelia strike was supported by the maritime distress report; Reuters said the claim involving the Layla had not been independently confirmed.
The Red Sea threat matters because Saudi Arabia has been routing millions of barrels a day toward its western port of Yanbu to reduce exposure to the Strait of Hormuz. Ships leaving the Red Sea for Asian markets normally pass through Bab el-Mandeb. If that southern exit becomes too dangerous, vessels may have to turn north toward the Suez Canal and then take a much longer route, raising voyage times, fuel costs and insurance premiums.
Why oil moved
The latest attack adds a second potential bottleneck while traffic through Hormuz remains severely constrained. In peacetime, about one-fifth of the world's traded oil and gas moved through the strait, according to the Associated Press. Markets are now weighing not only how much crude is being produced, but whether it can reach buyers safely and on schedule.
The military backdrop also worsened. President Donald Trump said Wednesday that the United States would destroy an Iranian bridge or power plant each time Iran attacks a ship in Hormuz. Iran warned in response that it could strike regional energy and economic infrastructure if Washington carried out those threats. U.S. Central Command then announced a 12th consecutive night of strikes on Iran, saying the operation aimed to reduce Tehran's ability to threaten civilian mariners and commercial vessels.
The caveat
Futures prices are reacting to the probability of a larger disruption, not a confirmed shutdown of all Saudi exports. The Encelia crew was reported to be fighting the fire, no deaths were reported, and the full extent of the damage was not immediately clear. Houthi claims about additional ships also remain only partly verified.
U.S. supply data offered a small counterweight. The Energy Information Administration reported that domestic crude inventories rose by about 2 million barrels last week as refinery activity and exports eased. That surprise increase could limit the rally if shipping conditions stabilize, but it is unlikely to erase the geopolitical premium while attacks continue.
What to watch next
The most important signals are whether the Encelia can resume operations, whether Saudi loadings at Yanbu continue, and whether more tankers reverse course near Bab el-Mandeb. Traders will also watch for verified damage to additional vessels and any escalation against ports, pipelines, bridges or power plants.
For consumers, the immediate consequence is not a guaranteed jump at every gasoline pump. Crude prices are only one part of retail fuel costs, and changes usually reach motorists with a lag. But if both Hormuz and the southern Red Sea route remain dangerous, higher freight, insurance and rerouting costs could keep upward pressure on oil and fuel prices even without a direct loss of production.
