Oil prices hit $95 a barrel as Iran war and Houthi threats escalate

Oil prices hit $95 a barrel as Iran war and Houthi threats escalate

Global oil prices surged to a six-week high on July 22, with Brent crude briefly topping $95 a barrel. The price spike follows escalating conflict between the United States and Iran and new threats from Houthi militants in Yemen to block a vital energy route in the Red Sea.

The price of Brent crude, the international standard, rose 3.4% to $94.07 after the morning peak. This represents a significant climb from less than $72 early in July, a level consistent with prices before the war with Iran began on February 28.

Escalating Maritime Threats

The price volatility is driven by a near-total blockade of the Strait of Hormuz, through which a fifth of all traded oil and natural gas typically passes. Tensions intensified on July 22 after Houthi militants threatened to block the Bab el-Mandeb Strait, a key artery for Saudi oil exports.

The impact was immediate. Five tankers changed course in the Red Sea on July 22 to avoid the strait. On July 21, three tankers carrying Saudi oil destined for India and China performed U-turns. To avoid the Strait of Hormuz, millions of barrels of Saudi oil per day have been redirected to the kingdom's Red Sea port of Yanbu. However, if the Bab el-Mandeb Strait is blocked, shipments must use the northern route through the Suez Canal, which increases transit costs and adds weeks to the journey.

Political and Military Escalation

U.S. President Donald Trump vowed on July 22 to destroy an Iranian power plant or bridge every time Iran fires at a ship in the Strait of Hormuz. Trump made these remarks around the time he attended a ceremony at Dover Air Force Base for four U.S. Service members killed in recent Iranian attacks—three in Jordan and one in Iraq. The wider conflict has resulted in the deaths of 18 U.S. Service members and injuries to more than 450 troops.

Iran responded with warnings of a "decisive response." Iranian Foreign Minister Abbas Araqchi stated on X:

"Our defence doctrine is clear: eye for an eye. Any aggression against Iran, including our infrastructure, will compel a powerful and decisive response. Those who contribute to such aggression, whatever the kind of support, will also be considered as legitimate targets."

Abbas Araqchi, Iranian Foreign Minister, via X

Iran’s joint military command further warned that it would target regional economic, electricity, gas, and oil infrastructure to prevent the export of even a single drop of oil if U.S. Threats are carried out. Mohammad Bagher Qalibaf, Iran’s top negotiator, added that the situation in the strait would not return to pre-war conditions and that regional security depends on the absence of U.S. Forces.

Military activity continues to intensify. On the 11th consecutive night of U.S. Bombing, explosions were reported in Tehran in the early hours of July 22. U.S. Strikes also hit three locations in Bushehr province, including an electricity post near Iran's only nuclear power plant, and locations in Hamadan province. Iran has retaliated by striking U.S. Assets at Camp Doha in Kuwait, the Al Azraq Air Base in Jordan, and the Sheikh Isa Air Base in Bahrain.

Market Ripple Effects

The surge in energy costs has pressured U.S. Stock markets and renewed fears of inflation. The S&P 500 fell 10.24 points to 7,498.96, while the Nasdaq composite sank 146.30 to 25,690.90. The Dow Jones Industrial Average dipped 6.06 points to 52,218.58.

Investor anxiety is reflected in the bond market. The yield on the 10-year Treasury rose to 4.65% from 4.63% late Tuesday, and is up from 3.97% before the war began. This shift has pushed long-term U.S. Mortgage rates to their highest levels in nearly a year.

Consumers are feeling the impact at the pump. AAA reported on July 22 that the average price for a gallon of regular gas in the U.S. Rose to $4.06. While this remains below the May peak of $4.56, it is significantly higher than the sub-$3 levels seen before the February attacks on Iran.

Diplomatic Outlook

Despite the violence, diplomatic channels remain open. A senior Iranian official told Reuters on July 20 that mediators have proposed a 10-day ceasefire intended to save an interim agreement signed in June. Iran’s Interior Minister Eskandar Momeni visited Pakistan this week to request continued mediation, though Pakistan stated on July 22 that the safety of shipping must be guaranteed.

The U.S. Maintains that allowing Iran control over the Strait of Hormuz would set a dangerous global precedent. U.S. Secretary of State Marco Rubio, speaking in Manila, stated that the U.S. Would do what is necessary to protect the interests of the United States and its allies.