Global oil price surge far from over

The most punishing oil price surge in modern history isn’t over yet.

Global oil prices extended their historic climb on Monday, March 30, as Yemen’s Houthi rebels launched their first attacks on Israel since the start of the Iran conflict, deepening fears that a widening war in the Middle East will keep squeezing the world’s most critical energy supply routes.

Brent crude futures jumped $3.09, or 2.74%, to $115.66 a barrel, capping a month in which the benchmark has soared 59% — the steepest monthly rise on record, surpassing even the gains seen during the 1990 Gulf War. U.S. West Texas Intermediate also climbed, rising 2.93% to $102.56 a barrel.

The staggering surge traces back to the effective closure of the Strait of Hormuz, a narrow waterway through which roughly a fifth of the world’s oil and gas normally flows, after the United States and Israel launched strikes on Iran on February 28.

The weekend’s Houthi attacks marked a dangerous new front. JP Morgan analysts led by Natasha Kaneva warned that the conflict was “no longer concentrated in the Persian Gulf and around the Strait of Hormuz, but now extends into the Red Sea and the Bab el-Mandeb — one of the world’s most crucial chokepoints for crude and refined product flows.”

Saudi Arabia has scrambled to reroute crude exports through its Yanbu port on the Red Sea, with shipments reaching 4.658 million barrels per day last week, according to analytics firm Kpler. But analysts warn that if Yanbu itself comes under threat, the kingdom would have few remaining options, with Egypt’s Suez-Mediterranean pipeline the only viable alternative.

Diplomatic efforts to end the conflict are underway, with Pakistan facilitating potential U.S.-Iran talks in Islamabad. But with Iran warning it stands ready to respond to a possible U.S. ground assault, and ceasefire talks yet to yield results, markets see little reason to expect relief anytime soon. —with reports from Reuters