Economic warfare is increasingly being used as a weapon in the escalating conflicts across the Middle East and Europe, with oil tankers coming under attack on multiple fronts.
This month, Iran has intensified its attacks on oil tankers in and around the Strait of Hormuz, attempting to exert control over this critical oil chokepoint. Iran's Houthi allies in Yemen opened a second front this week, firing on two Saudi oil tankers in the Red Sea after announcing a maritime blockade against Saudi Arabia.
Meanwhile, according to reports, Ukraine claims to have struck over 150 tankers, cargo ships, and other vessels linked to Russia's shadow fleet in the Sea of Azov and the Black Sea.
Helima Croft, Global Head of Commodity Strategy at RBC Capital Markets, stated on Thursday that the oil market is now under pressure from a multi-front war. With the security situation rapidly deteriorating in the southern Red Sea and the Strait of Hormuz, oil prices have surged over 30% in July, with Brent crude breaking through the $100 per barrel mark for the first time since May.
Shipping traffic through the Strait of Hormuz rebounded briefly after a memorandum of understanding was signed between the US and Iran on June 17 to reopen the strait, but has since declined sharply again.
Dimitris Maniatis, CEO of the Athens-based maritime risk services firm Marisks, said: "After the memorandum collapsed, commercial shipping has entered the worst phase of this conflict."
"The main reason is that Iran wants greater authority and control over matters concerning the strait," Maniatis added.
According to data from the International Maritime Organization (IMO), a UN agency, 61 commercial vessels have been attacked in the Persian Gulf, Strait of Hormuz, and Gulf of Oman since March 1, resulting in at least 17 seafarer deaths and dozens of injuries.
IMO data also shows that at least a dozen oil tankers have been attacked in and around the Strait of Hormuz this month, with at least two seafarers killed, as fighting between the US and Iran intensifies sharply.
Attacks in the Red Sea now threaten millions of barrels per day of Saudi oil exports, which were rerouted via pipeline to its western coast after the security situation in the Strait of Hormuz deteriorated. Saudi exports must pass through the Bab el-Mandeb Strait, a chokepoint connecting the Red Sea to the Gulf of Aden.
"The Iranians and Houthis are now joining forces to deliver a very significant blow to US national interests, US oil companies, and Saudi Arabia," Maniatis said. "But they haven't completely choked off exports yet."
Houthi attacks on Red Sea vessels from 2023 to 2025, in response to Israel's war in Gaza, have already sharply reduced shipping traffic through the Bab el-Mandeb Strait. Shipping through the strait has not yet fully recovered.
Matt Smith, Research Director at commodity data analytics firm Kpler, said Saudi Arabia could divert some oil via a pipeline from its Red Sea port through Egypt to the Mediterranean, but the logistics are complex.
Smith explained that supertankers cannot transit the Suez Canal fully laden because the waterway is too shallow. Saudi Arabia would need to offload half a cargo at Ain Sokhna port, pump it via pipeline to Sidi Kerir port, allow the supertanker to transit the Suez Canal, and then reload the oil on the other side.
Smith added that due to Houthi threats in the Bab el-Mandeb Strait, supertankers would then face a longer journey around Africa to reach Asian destinations, and would need to take the same route via the Suez Canal on the return trip. The entire round trip would take approximately eight weeks.
Middle East Oil Chokepoints
Croft noted that due to the disruption in the Red Sea, maritime oil transport from the Middle East is increasingly facing a "nowhere to go" situation.
Meanwhile, in the Black Sea, the Caspian Pipeline Consortium (CPC) has stopped loading tankers at the Russian port of Novorossiysk due to vessel attacks. In a note to clients this week, Croft pointed out that Kazakhstan relies on this pipeline for approximately 80% of its crude oil exports.
Citing limited alternative export routes for Kazakhstan, Croft indicated that its production of around 1.7 million barrels per day in June could face the risk of being shut in. She also noted that Ukraine has heavily struck Russian refineries, taking more than 50% of the country's refining capacity offline.
Caspian Pipeline Consortium
"Russia has now imposed a ban on refined product exports, and its refineries have been hit so heavily by Ukraine. Russia is one of the world's largest exporters of refined products and one of the largest diesel exporters. This is tightening both the product market and the crude oil market simultaneously," Croft said.
Croft warned in her report that a dangerous escalation in the Middle East could push Brent crude prices above the $128 per barrel high seen after the 2022 Russia-Ukraine conflict. In a worst-case scenario, involving a full-scale war in the region, Brent crude could break through the all-time high of $148 per barrel reached in 2008.
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