Oil: Middle East tensions raise supply risks – MUFG

Lloyd Chan at MUFG underscores escalating US–Iran tensions and threats to energy infrastructure and shipping through the Strait of Hormuz and Bab el-Mandeb. He notes that Brent has rebounded above USD90 and that attacks on Saudi Oil tankers and warnings to shipping firms heighten the risk of a broader global energy shock impacting regional exports and markets.

Brent supported by rising conflict risk

"Geopolitical risks in the Middle East continue to escalate as tensions between the US and Iran intensify once again. President Trump warned that the US would target Iranian bridges and power infrastructure if Iran attacks vessels transiting the Strait of Hormuz. In response, Iran stated that it would strike power facilities across the Gulf region if its own infrastructure and energy assets come under attack."

"Tehran has also warned shipping companies against using alternative routes around Hormuz. Since the collapse of the US-Iran ceasefire memorandum signed in June, renewed hostilities have led to a sharp decline in tanker traffic through the Strait of Hormuz."

"Adding to supply concerns, the Houthis have reportedly attacked two Saudi oil tankers in the Red Sea, threatening shipping through the Bab el-Mandeb Strait—an increasingly important alternative route for regional oil exports."

"The key market risk is whether the conflict shifts from a phase of renewed escalation to one that triggers a broader global energy shock. Brent crude prices have rebounded above USD90/bbl this month."