Yemen fighting pushes oil prices to new highs

Brent crude traded near $107 a barrel on September 11 after jumping more than 6% the day before. A new market factor was the sharp escalation of fighting in Yemen and the advance of the Houthis toward the Bab el-Mandeb Strait, one of the world's key shipping routes.

U.S. WTI crude traded around $102 a barrel. For the week, Brent headed for its biggest gain since July as traders priced in the risk of new supply disruptions amid expanding Middle East conflicts.

Additional pressure on the market came from the intensified confrontation between Yemen's Houthis and Saudi-backed forces. Earlier, the Houthis announced the capture of the strategic port city of Mokha on the Red Sea coast.

The advance on Mokha is particularly significant for the oil market because of the city's proximity to the Bab el-Mandeb Strait. Through this narrow maritime corridor, ships transit between the Red Sea and the Gulf of Aden, so the escalation of fighting near it increases risks for commercial shipping and energy transportation.

RBC Capital Markets analysts believe that a resumption of full-scale war between Saudi Arabia and the Houthis could be one of the factors leading to a scenario of significantly higher oil prices.

In their assessment, if the Houthis consolidate their position in the Mokha area, the group could extend its ability to obstruct shipping further south, closer to the narrowest sections of Bab el-Mandeb.

Thus, in addition to oil supply risks already emerging from the broader Middle East escalation, a potential threat to another strategic maritime route has been added. These concerns about physical supply disruptions remain one of the main factors supporting oil prices.

Source: Bloomberg