Crude oil prices traded higher on Monday, 8th June, although well below their intraday peaks, as investors weighed signs of easing tensions between Iran and Israel against growing risks to global shipping routes. Brent crude futures rose 1.56% to around $94 per barrel after briefly climbing above $97 earlier in the session. WTI crude futures gained 1.25% to approximately $91.6 per barrel after touching levels above $95. The market initially rallied on fears that renewed military exchanges between Iran and Israel could threaten energy supplies across the Middle East. However, prices retreated from session highs after Iranian state media reported that Tehran had concluded its military operations against Israel. That statement helped ease concerns that ongoing hostilities could derail ceasefire negotiations between Iran and the United States or further disrupt oil exports through the Persian Gulf. Red Sea Threat Emerges as New Market Risk While tensions surrounding Iran appeared to cool, a new threat quickly emerged. Yemen's Iran-backed Houthi movement announced a complete ban on Israeli ships and vessels associated with Israel transiting the Red Sea. The group warned that such vessels would now be treated as military targets and indicated that further escalation could follow. The development immediately raised concerns about the security of the Bab el-Mandeb Strait, one of the world's most important maritime chokepoints. Why does the Bab el-Mandeb Strait matter so much? The passage serves as the southern gateway to the Red Sea and connects global shipping traffic to the Suez Canal. A significant portion of global oil, liquefied natural gas, and containerized trade flows through the route each year. If shipping traffic faces major disruptions there, energy exporters could be forced to take longer and more expensive routes around Africa, increasing transportation costs and tightening supply chains. Shipping Companies Delay Red Sea Transit The Houthi announcement appears to have already affected commercial shipping activity. Several major international shipping companies reportedly instructed vessels operating near the region to delay entering the Red Sea while they assess the security situation. The uncertainty is particularly significant because some oil producers have increasingly relied on Red Sea export routes. Since the start of the Iran conflict, Saudi Arabia has redirected a larger share of its crude exports away from the Strait of Hormuz and toward the Red Sea through the port of Yanbu Port. If both the Strait of Hormuz and the Bab el-Mandeb Strait face operational risks, global energy markets could face a much larger supply challenge. OPEC+ Moves Ahead With Production Increase On the supply side, OPEC+ approved another production increase for July. The group agreed to raise output quotas by 188,000 barrels per day despite ongoing geopolitical risks across the Middle East. Source: Organization of the Petroleum Exporting Countries (OPEC) Normally, additional production would put downward pressure on oil prices. However, traders appear more focused on potential supply disruptions than on incremental increases in output. Meanwhile, weaker import demand from China also helped offset some supply concerns. Recent data suggests Chinese refiners have increasingly relied on existing inventories rather than boosting overseas purchases during the conflict. Markets Focus on Two Critical Chokepoints Going forward, oil traders are likely to focus on two strategic waterways simultaneously. The first remains the Strait of Hormuz, where hopes for a US-Iran agreement continue to support expectations that energy exports could normalize. The second is the Bab el-Mandeb Strait, where Houthi threats have introduced a fresh source of uncertainty for global shipping and energy markets. While Iran's statement that military operations have ended reduced fears of immediate escalation, the emergence of new risks in the Red Sea suggests that geopolitical premiums may remain embedded in crude oil prices for the foreseeable future.
