Category: Geopolitics | Economy | Energy
The latest escalation between the United States and Iran is no longer confined to military sites inside Iran or shipping through the Strait of Hormuz. The crisis is spreading across the Gulf and towards the Red Sea, creating a potentially more complicated threat to international oil supplies, liquefied natural gas shipments and maritime trade.
US forces conducted another round of strikes against Iranian command centres, missile and drone launch sites, air-defence systems and maritime capabilities. Iran responded by targeting sites associated with the United States in Bahrain, Kuwait and Jordan. At least one tanker was struck in the Strait of Hormuz, while two vessels carrying Saudi crude towards Asian markets reversed course in the Red Sea after Yemen’s Iran-aligned Houthis announced a maritime blockade against Saudi Arabia.
Brent crude consequently climbed to a five-week high. It traded at approximately $91.34 a barrel, up 2.4%, while US West Texas Intermediate rose to about $85.03 a barrel. Brent touched $91.56 during trading, its highest level since 11 June.
The Run
| Latest development | How it changes the story | |
| US military operations | US forces completed their tenth successive night of attacks against Iran. | The conflict is becoming a sustained military campaign rather than a brief retaliatory exchange. |
| Iranian response | Iran said it targeted US-linked sites or facilities in Bahrain, Kuwait and Jordan. Jordan reported intercepting five Iranian drones. | More Gulf countries are being drawn into the operational geography of the conflict. |
| Tanker incident | A tanker in the Strait of Hormuz reported being struck by a projectile, forcing its crew to abandon the vessel. | The threat to merchant shipping is no longer theoretical; crews, vessels, insurance and cargo movements are directly affected. |
| Houthi announcement | The Houthis announced a naval blockade against Saudi Arabia and threatened shipping around the Red Sea gateway. | Saudi Arabia’s principal alternative export route around Hormuz is now also under pressure. |
| Shipping response | Two tankers carrying Saudi crude towards China and India reversed direction in the Red Sea. | The announcement has already begun changing vessel behaviour and Asian supply routes. |
| Oil price | Brent rose to about $91.34 and WTI to $85.03 during Tuesday trading. | Markets are adding a renewed supply-disruption premium despite diplomatic activity. |
| Diplomatic track | Iran received a proposal for a ten-day ceasefire, while Pakistan resumed mediation efforts. | Diplomacy remains active, but markets are not treating a ceasefire as secure or imminent. |
The Energy Numbers Behind the Crisis
| Indicator | Verified figure | Significance |
| Oil transiting the Strait of Hormuz in the first half of 2025 | 20.9 million barrels per day | Equivalent to approximately 20% of global petroleum-liquids consumption and one-quarter of maritime oil trade. |
| LNG passing through Hormuz in the first half of 2025 | 11.4 billion cubic feet per day | More than 20% of global LNG trade, principally involving Qatari exports. |
| Commodity vessels crossing Hormuz on Monday | Four | Traffic remained severely constrained compared with normal commercial movements. |
| Saudi crude tankers reversing direction | Two | Both vessels had loaded oil intended for Asian buyers, including China and India. |
| Saudi oil potentially exposed to Houthi action | Around 2.5 million barrels per day | Estimate cited after the maritime-embargo announcement. |
| Brent intraday level on 21 July | Around $91.34 a barrel | Five-week high and approximately 2.4% above the previous session. |
From One Chokepoint to a Two-Chokepoint Crisis
For much of the conflict, the central energy question concerned the Strait of Hormuz. Oil and LNG exporters inside the Gulf depend heavily on this narrow maritime passage. Iran, Iraq, Kuwait, Qatar and Bahrain have limited practical alternatives for the majority of their exports, while Saudi Arabia and the United Arab Emirates possess pipeline routes that can bypass the strait to a certain extent.
Saudi Arabia’s East–West Pipeline carries crude towards the Red Sea port of Yanbu. It is therefore one of the principal mechanisms through which Saudi exports can avoid Hormuz. The Houthi threat changes this calculation. Cargo redirected away from the Gulf may still have to pass through waters exposed to disruption around the Red Sea and Bab el-Mandeb.
This is the strategic significance of the latest development. The market is no longer assessing only whether Hormuz remains navigable. It must also calculate whether Saudi oil rerouted towards the Red Sea can continue moving safely.
A complete disruption around Bab el-Mandeb could place an additional share of global oil flows at risk, while shipping diversions would lengthen routes, consume more fuel and reduce the number of voyages that individual vessels can complete.
Why Oil Has Not Risen Even Further
The escalation is severe, but Brent remains well below some of the extreme scenarios discussed during earlier stages of the conflict. Three factors are restraining prices.
First, diplomatic channels remain open. Iranian officials have acknowledged receipt of a proposed ten-day ceasefire, and Pakistan has resumed mediation.
Second, global oil demand has weakened in response to higher prices, reduced availability and conservation measures. The US Energy Information Administration estimated in June that the world would consume approximately one million fewer barrels per day in 2026 than in the previous year.
Third, global supply partially recovered during June after some traffic resumed through Hormuz. The International Energy Agency estimated that global production rebounded by 4.1 million barrels per day to 98.8 million barrels per day during June.
These buffers, however, depend on shipping lanes remaining at least partially operational. A simultaneous deterioration around Hormuz and the Red Sea would weaken them quickly.
The Global Inflation Risk Returns
The oil shock is now feeding directly into expectations for inflation and interest rates. Higher crude prices affect petrol, diesel, aviation fuel, plastics, transport and manufacturing costs. LNG disruptions can also raise electricity and industrial energy prices, particularly across Asian and European importing economies.
The IEA has described the Middle East conflict as the largest oil-supply disruption in the history of the global market and has said that restoring stable Hormuz transit is indispensable for normalising international oil and gas flows.
Financial markets are already reflecting this risk. Treasury yields have risen as investors reassess inflation, while money markets have priced the possibility of additional US interest-rate increases. At the same time, technology stocks have advanced, producing an unusual combination of stronger equities, higher oil prices and elevated bond yields.
What It Means for India and Asia
The two Saudi crude tankers that changed course were carrying oil intended for China and India. This provides a direct example of how the crisis can affect Asian refiners even when a cargo has already been loaded.
For India, the immediate exposure is not limited to the quoted Brent price. It includes:
| Transmission channel | Possible effect |
| Longer shipping routes | Higher freight costs and delayed deliveries |
| War-risk insurance | Increased landed cost of imported crude and LNG |
| Reduced tanker availability | Greater competition for suitable vessels |
| Stronger US dollar | Additional pressure on rupee-denominated import costs |
| Higher fuel and transport costs | Potential pass-through into wholesale and consumer inflation |
| LNG disruption | Pressure on fertiliser, power and industrial users |
These are risk channels rather than confirmed domestic price outcomes. The scale of the effect will depend on how long the disruption continues, whether India secures alternative cargoes and whether the diplomatic initiative produces a functioning ceasefire.
What to Watch Next
The next decisive indicators will be actual vessel movements rather than political declarations alone.
Markets will closely track whether Saudi tankers resume their voyages, whether Hormuz crossings increase from the exceptionally low levels reported this week, whether the Houthis attempt to enforce their announced blockade and whether the proposed ten-day ceasefire produces a verifiable halt in attacks.
A negotiated pause could remove part of the war premium from crude prices. A confirmed attack near Bab el-Mandeb, however, would establish a second operational front against energy shipping and could push oil substantially higher.