Exports in a Stranglehold

Terror in the Red Sea: Why Oil Prices Are Skyrocketing

As in 2024 (picture), the Houthi militia has once again attacked oil tankers in the Red Sea. The blockade declared by the terrorist militia is driving up the price of crude oil even further.(Bild: AFP/ANSARULLAH MEDIA CENTRE)

In light of the terror in the Red Sea, the price of oil has risen to over $100 per barrel, causing gas prices to skyrocket in Austria as well. In addition to the Strait of Hormuz, another oil chokepoint is now under threat. So the real price shock may still be ahead...

The newly escalated war with Iran continues to keep oil prices in a stranglehold. After the regime in Tehran fired on merchant ships in the Strait of Hormuz, the U.S. has been striking back night after night with airstrikes. Hardly any tankers are now venturing through the strait, and as a result, the price of Brent crude has been rising for weeks. It currently stands at just under $100 per barrel (195 liters).

After Attack: Trump Threatens Houthis
However, the latest price jump of about twelve dollars is primarily due to a new twist in the Iran conflict: On Wednesday night, the Houthi militia—an ally of Iran—attacked two Saudi oil tankers in the Red Sea with missiles and drones. The tankers had disregarded the “blockade” declared by the terrorist militia. U.S. President Donald Trump threatened Tehran and the Houthis with “military punishment” should they attack again. EU Foreign Affairs Commissioner Kaja Kallas called on the militia to cease its threats.

Oil Flow Curtailed
For the time being, however, the international flow of oil is now being curtailed at two critical chokepoints. This could have dire consequences. Until now, the Red Sea had served as an important alternative route for Saudi Arabia, allowing at least part of the oil traffic that would otherwise have passed through the Strait of Hormuz to be rerouted.

Saudi Arabia shipped more than five million barrels daily through Bab al-Mandab. Now the Houthis, who control western Yemen, are threatening this strait. Saudi oil can also be exported through the Suez Canal in the north. However, it is not deep enough for fully loaded supertankers, Nasha Kaneva of JPMorgan emphasized to CNN.

Oil Price Could Skyrocket to $120
The export route from the Red Sea southward to the Gulf of Aden is therefore essential. If traffic there were to drop to a minimum, oil prices could reach $120, Jay Hatfield, managing director of the investment firm Infrastructure Capital Management, told the Bloomberg news agency. “If there’s no transport, you have to use oil sparingly. And you achieve that through higher prices.”

Due to these developments, fuel prices in Austria also skyrocketed again. On Thursday, the Austria-wide median price for diesel was 2.038 euros per liter and for gasoline 1.881 euros, according to data from E-Control. The previous day, the price of diesel was still 2.008 euros and gasoline was 1.878 euros.

Debate Over Tax Cuts
Calls for government intervention are growing louder once again. While the ÖAMTC is demanding a reduction in the mineral oil tax, the Austrian Trade Union Federation (ÖGB) believes this does not go far enough. ÖGB economist Angela Pfister is also considering a margin cap, similar to the one previously in place under the fuel price cap.

However, Wifo Director Gabriel Felbermayr advises against a margin cap, calling it “highly complex and of questionable effectiveness,” as he stated on Friday on Ö1’s “Morgenjournal.” He considers a reduction in the mineral oil tax a more sensible way to “give something back.”