Oil Prices Fall Despite Heightened Red Sea Shipping Disruptions

Front-month West Texas Intermediate (WTI) crude oil traded at $89.91 per barrel on Friday morning, down $2.28 or 2.47% from the previous close, according to live price data. The global benchmark, Brent crude, fell a similar 2.44% to $91.96. The price for Bakken crude at the wellhead, reflected in its differential to WTI, was $3.42 per barrel below the benchmark.

The morning's price decline follows a period of extreme volatility and gains earlier in the week, driven by escalating threats to key global oil shipping lanes. According to OilPrice.com, September WTI futures had surged to $92.31 late Thursday, marking a weekly gain of over 12% at that point. The market was reacting to a compounded crisis in the Middle East, where both primary and alternate export routes for Saudi crude are under threat.

The initial driver was a worsening U.S.-Iran conflict impairing the Strait of Hormuz, a critical chokepoint for global seaborne oil trade. Iran’s Revolutionary Guards declared the strait under its control and effectively closed while U.S. military action continued, OilPrice.com reported. The U.S. had completed twelve straight nights of strikes on Iran as of Thursday.

In response to the Hormuz risks, Saudi Arabia had redirected most of its crude shipments through the Bab el-Mandeb Strait and the Red Sea. However, that alternate route is now also facing disruption. The Iran-aligned Houthis announced this week they had expanded their campaign to target Saudi oil shipments through Bab el-Mandeb, according to OilPrice.com.

At least one tanker, the Merbabu, carrying Saudi crude transited the Bab el-Mandeb Strait this week with its transponder switched off to move undetected, a tactic known as operating in "dark mode." Maritime intelligence firm Windward noted that enforcement of the Houthi blockade appears calibrated to vessel crew and ownership, not cargo, with some China-bound tankers continuing to move through the area.

For Bakken operators, the volatile geopolitical premium presents a mixed picture. While higher global benchmark prices are beneficial, the stability of the Bakken differential near -$3.42 suggests local market logistics and pipeline takeaway capacity remain functional. The primary impact is on revenue certainty, as operators face a market reacting sharply to shipping disruptions half a world away that directly threaten the flow of competing crude from the Persian Gulf. Natural gas prices showed minimal movement, edging up one cent to $2.93.