After armed clashes between the United States and Iran reignited and Yemen's Iran-aligned Houthi rebels declared a naval blockade against Saudi Arabia, international oil futures topped $90 a barrel for the first time since June. With the U.S.-Iran conflict expected to drag on and major countries including the United States running down crude inventories, the possibility of higher oil prices remains open. In response, the government, which had been preparing an exit strategy for the oil price cap, appears set to keep the cap in place for the time being.
According to Reuters on the 21st, on the 20th (local time) at the London ICE Futures Exchange, September delivery Brent crude futures at one point traded at $91.42 intraday. It was the first time in 39 days since June 11 that Brent futures rose above $90 a barrel. Brent futures ended the day at $89.22, up 1.27% from the previous day. On the New York Mercantile Exchange, August delivery West Texas Intermediate (WTI) also settled at $84.84 a barrel, up 2.85% from the previous day.
The rise in international oil futures was driven by a threat from Yemen's Houthi rebels, backed by Iran, to attack ships transiting the Red Sea shipping lanes. The Houthis said on the 20th local time that they were declaring a naval blockade against Saudi Arabia, effective immediately.
Although the Houthis did not specify how the blockade would work, some expect they could block the Bab el-Mandeb Strait, which links the Red Sea to the Arabian Sea, likely halting Saudi Arabia's crude exports.
The Houthi rebels have previously attacked vessels between 2023 and 2025 in waters near the Bab el-Mandeb Strait, which links the southern Red Sea and the Gulf of Aden.
The Bab el-Mandeb Strait is a key corridor for Middle Eastern and Asian countries to import and export oil, gas and other raw materials. Until the Houthis began attacks on the strait in 2023, about 10% of global seaborne trade passed through it. However, according to the International Monetary Fund (IMF) and the University of Oxford, the share of global seaborne trade transiting the Bab el-Mandeb had fallen to about 3% as of last year.
The concern is that if Houthi attacks materialize, even the detour routes for crude exports that began after the United States and Iran went to war on Feb. 28 could be cut off. After the Strait of Hormuz was blocked amid U.S.-Iran confrontation, Saudi Arabia diverted crude shipments via Yanbu port on the Red Sea. As of May, Saudi Arabia exported 3.65 million barrels per day through Yanbu. That is slightly more than half of Saudi Arabia's daily crude exports before the war between the United States and Iran broke out.
Foreign media and global investment banks say the threat of Houthi attacks could send international oil prices soaring in the coming months. Goldman Sachs projected that if disruptions to maritime transport in the Strait of Hormuz persist, Brent futures could top $120 a barrel in the fourth quarter of this year. Goldman Sachs said, "Rising tensions in the Middle East and crude exports from the Persian Gulf falling to 45% or less of prewar levels are pushing oil prices back up."
Bloomberg also said, "For Saudi Arabia, the largest crude exporter in the Persian Gulf, to ship oil to Asian customers via the Red Sea, tankers must pass through the Bab el-Mandeb Strait, where the Houthi rebels can launch attacks," adding, "If safety risks prevent tankers from using that route, oil prices could spike."
In the energy sector, considering these circumstances, many expect the government to lean toward keeping the oil price cap in place for now. The government is set to announce the eighth oil price cap on the 24th.
For the seventh oil price cap, which has applied since June 27, the government cut the cap by 150 won per liter and reviewed a soft landing and an end to the program. But with even the Red Sea potentially being blocked, it is likely to move toward extending and maintaining the cap for the time being.
Within the government, there is also a tilt toward maintaining the oil price cap. A senior official at the Ministry of Trade and Industry (MOTI) said, "The Red Sea is not closed yet, but we are preparing contingency plans such as importing crude via the Suez Canal just in case," adding, "The oil price cap will be maintained."