Gulf Conflict Escalates, Disrupts Shipping and Fuels Price Rally

Geopolitical conflict in the Middle East intensified sharply on Tuesday, disrupting key oil shipping lanes and propelling crude prices to six-week highs, according to reports from OilPrice.com. The escalating violence presents renewed volatility and upside price risk for Bakken producers.

Yemen's Houthi militia declared an immediate maritime embargo on Saudi Arabia, forcing two Saudi crude tankers bound for China and India to make U-turns in the Red Sea. The group warned shipping companies that loading or discharging cargo at Saudi ports could result in being targeted "in any location," according to OilPrice.com. This new front along the Bab el-Mandeb Strait threatens the pipeline route Saudi Arabia uses to move crude to the Red Sea port of Yanbu.

Simultaneously, the Strait of Hormuz remains highly dangerous. Two tankers managed by Greek operator Dynacom were struck by projectiles Monday while sailing a U.S.-facilitated southern corridor off Oman. The Malta-flagged Kavomaleas caught fire and was evacuated, while the Liberian-flagged supertanker Acheloos was hit and diverted. Satellite tracking shows supertanker crossings through the strait have fallen to about two a day, down from eight in late June.

The broader U.S.-Iran conflict entered its tenth consecutive night of strikes early Tuesday, with U.S. Central Command targeting Iranian command centers and missile sites. Iran's Revolutionary Guard Corps (IRGC) claimed new attacks, stating it destroyed Amazon's central data infrastructure in Bahrain and hit U.S. air defense systems there. Kuwait reported a second consecutive day of attacks on its power-generation and water-desalination plants.

These sustained disruptions are translating directly to higher prices. West Texas Intermediate (WTI) crude reached six-week highs on Tuesday. The national average for gasoline hit $4.003 a gallon on Monday, up 13 cents in a week and back above $4 for the first time since mid-June, according to AAA data cited by OilPrice.com. Diesel climbed to $5.10 a gallon.

Mediating countries have floated proposals for a possible 10-day ceasefire to halt the fighting, which is now in its fifth month. A Polymarket prediction market showed 87% of traders believe Strait of Hormuz traffic will not return to normal by August 31.

In a separate global energy development, India became the world's most active long-term LNG buyer in 2025, contracting 8.4 million tons per year, according to the International Group of LNG Importers (GIIGNL). The group noted that the loss of Qatari LNG cargoes, due to an Iranian missile strike in March and dependence on the Strait of Hormuz, is severely tightening the global gas market.