Yesterday, the Iran-backed Houthi militia, which controls part of Yemen, said it attacked two Saudi oil tankers headed for the Bab el-Mandeb Strait—a critical sea artery that Saudi Arabia uses to ship almost two-thirds of the oil that would typically go through the blockaded Hormuz. The escalation pushed oil prices above $100 per barrel for the first time since May, extending gains from $72 earlier this month. Now investors are contending with the prospect of a prolonged closure of another key Middle Eastern waterway. Saudi oil could still reach global markets via the Red Sea’s northern exit, aka the Suez Canal, but that would involve longer delivery times for Asian customers and higher costs for vessel operators. President Trump said yesterday that he will inflict “major military punishment” on the Houthis and Iran for any future attacks. It’s already being felt statesideSoaring oil prices are again hitting American wallets and corporate coffers: - US gas prices climbed past $4 per gallon this week from $3.94 a month ago and $2.94 in February, when the conflict began.
- This week, American Airlines revised down its yearly earnings estimate for the second time in three months, citing an additional $1.6 billion in expected fuel costs for the rest of the year.
Pricier oil has also pushed up bond yields in recent days, amid increased odds of the Federal Reserve keeping interest rates elevated or hiking them further to fight inflation. Meanwhile…the US emergency oil reserve recently dropped to its lowest level since 1983, as the government pumps millions of barrels into the market in a bid to stabilize prices. Looking ahead: If the conflict continues to choke off oil shipments from Iran and other Gulf states, it could push oil prices even higher, analysts say. As could any potential Iranian or Houthi attacks on energy production infrastructure in the region.—SK | 
