Brent crude jumps above $106 after Houthi attack against Saudi sites

Oil prices surged by approximately 3% on Thursday (Sep 24) to a one-week high following a Houthi missile attack on Saudi Arabia, raising concerns about potential supply disruptions, although trade remained volatile as the US and Iran engaged in talks to reopen the Strait of Hormuz. Brent futures increased by $3.52, or 3.4%, to settle at $106.60 per barrel, while US West Texas Intermediate crude rose by $2.45, or 2.7%, to $94.61 per barrel.

Both contracts touched their session highs, marking a 5% increase. Brent reached its highest close since September 15 and marked the first rise for WTI in six sessions. Saudi Arabia successfully intercepted six ballistic missiles fired by Iran-backed Houthi rebels, preventing attacks on the southern province of Taif and the Red Sea area of Yanbu, according to the Saudi-led coalition in Yemen.

In response to new US sanctions, Iranian airlines were barred from neighboring countries like the UAE and Oman. The US has extended its financial sanctions to target companies from third countries doing business with Iranian firms, a tactic known as "secondary sanctions." Iran threatened retaliation against countries complying with the US ban by making their airports unusable.

Saudi Arabia is also increasing crude pumping volumes through its East-West Pipeline to the Red Sea export hub of Yanbu, although tanker loadings have not resumed yet. US and Iranian negotiators in New York are exploring a phased approach to ending the nearly seven-month conflict, including reopening the Strait of Hormuz and lifting the US economic blockade of Iran.

Both sides are wary of relinquishing their leverage in the negotiations. High diesel prices due to supply disruptions have led to high-level contacts between the EU and the US, with the US reportedly considering a ban on diesel exports. However, the EU believes such a move could harm both sides, as Moscow has banned diesel exports due to disruptions from Ukrainian attacks on Russian refineries and energy infrastructure.