Oil Prices Brace for Rally: Geopolitical Tensions Surge as Red Sea Attacks Push Crude Near $120 Mark

Oil Prices Brace for Rally: Geopolitical Tensions Surge as Red Sea Attacks Push Crude Near $120 Mark​

Crude oil prices are facing intense volatility this week as escalating geopolitical risks mount. Attacks by Iran-aligned Houthis on shipping in the Red Sea have stoked concerns over critical maritime chokepoints. This environment, combined with reduced supply from Kazakhstan, has driven upward pressure on global crude benchmarks.

Geopolitical Risks Intensify Amid Red Sea Tensions​

Brent futures were poised for a significant weekly climb, fueled by heightened instability in the Middle East. Brent oil closed at $99.68 a barrel, down 1% or 81 cents at 0126 GMT, yet was still tracking towards a 13.5% rise this week.

This surge follows reports that Iran-aligned Houthis attacked two Saudi oil tankers in the Red Sea. These incidents have amplified fears of the Bab el-Mandeb shipping route being shut down. This waterway connects the Indian Ocean and the Red Sea, representing the world's second most important oil transit channel after the Strait of Hormuz.

The attacks coincide with broader tensions, as Houthis stated they were imposing a naval blockade on Saudi Arabia. Meanwhile, Iran had previously pushed for blocking the Bab el-Mandeb gateway if U.S. military action continued against Iranian infrastructure.

Supply Concerns Drive Up Market Urgency​

Beyond the maritime risks, supply constraints are also adding to the market's volatility. Separately, Kazakhstan's energy ministry announced that oil companies have temporarily cut production. This decision followed suspected Ukrainian drone attacks leading to the closure of the country's main Black Sea export terminal.

The Caspian Pipeline Consortium has since suspended loadings, having stopped receiving oil from Kazakhstan. Industry sources indicate this route currently accounts for approximately 2% of global daily crude supply.

Analyst Outlook: $120 Price Target and Diplomatic Concerns​

Financial experts are weighing the risks against potential diplomatic de-escalation. Goldman Sachs has specifically warned that Brent crude could climb to $120 a barrel if disruptions targeting the Strait of Hormuz continue. The firm maintains its base case is that Middle East tensions will eventually subside.

However, analysts caution that these forecasts remain tilted towards upward risk due to possible shipping disruptions through both the Red Sea and the Strait of Hormuz.

Anindya Banerjee, Head of Commodity Research at Kotak Securities, emphasized that geopolitical risks are currently driving oil prices. He suggested that any strike on major Gulf export infrastructure could force a retest of the $95–$100 level and beyond.

Banerjee added that the market is now focusing less on military strikes and more on the diminishing likelihood of a diplomatic solution. Tehran has set new conditions for negotiation restart, complicating the return of normal tanker traffic through the Strait of Hormuz.