The head of the International Energy Agency has said that renewed attacks in the Middle East increase concerns over energy supplies but that the market still has cushions to absorb the impact.
“The escalation in hostilities affecting the Strait of Hormuz and energy infrastructure in the region increases security of supply concerns and uncertainty over the market outlook,” IEA Executive Director Fatih Birol said in a statement on Tuesday.
“For the moment, crude oil markets continue to benefit from several cushioning factors,” he added, pointing to increased exports from several countries and Saudi and United Arab Emirates oil reaching markets by alternative routes.
However, Saudi Arabia’s main alternative route of using a pipeline to load tankers in the Red Sea port of Yanbu is under threat as Iran’s Yemeni allies, the Houthis, declared they would blockade Saudi Arabia’s ports.
Oil markets have for months feared that the Houthis would return to attacking shipping in the Red Sea and Gulf of Aden – as they did during the Israeli genocidal war in Gaza – cutting off yet more crude from global markets.
The initial market reaction to the announcement by the Houthis was restrained, however, as Iran indicated that mediation efforts were still underway, calming investor jitters.
“Threats to the Bab al Mandeb Strait, which has become increasingly important as a route to bypass the Strait of Hormuz, exacerbate these concerns further,” said Birol, referring to the narrow passage between the Red Sea and Gulf of Aden.
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