The Iran-aligned Houthi movement struck two Saudi-flagged oil tankers in the Red Sea on 23 July, opening a new maritime front in the five-month-old US-Iran war and driving Brent crude above $100 a barrel for the first time since May. The Houthi-run Al-Masirah television said the Encelia and Layla were targeted with drones and missiles for violating a naval blockade imposed on Saudi Arabia three days earlier. Riyadh confirmed the Encelia was hit and caught fire, while the UK Maritime Trade Operations centre reported a projectile strike on a tanker near the Saudi coast. The attacks directly threaten the Bab el-Mandeb strait, the southern gateway to the Red Sea, through which Saudi Arabia has been piping an estimated 4.5 million barrels per day of crude to bypass the near-total closure of the Strait of Hormuz.

Washington immediately held Tehran responsible. President Donald Trump wrote on Truth Social that the Houthis are a “Surrogate and/or Proxy of Iran” and threatened “major military punishment” against both. He later told Axios he was considering a “massive attack, bigger than ever before” on Iran, adding that Israel would join “in two minutes” if asked. US Central Command confirmed a twelfth consecutive night of strikes on Iranian military targets, while Secretary of State Marco Rubio said the Houthis had been “suckered” into the conflict by Iran. Tehran, for its part, vowed to continue retaliatory strikes on US bases in Kuwait and Jordan as long as American attacks on its infrastructure persist, with Foreign Minister Abbas Araghchi describing the Iranian doctrine as “an eye for an eye.”

The widening of the conflict to a second strategic waterway sent immediate shockwaves through global markets. Brent crude settled 7% higher at $100.69, while European and US equity indices fell sharply on fears that sustained high energy prices would entrench inflation and force central banks to raise interest rates. The European Central Bank, which held rates steady on Thursday, warned that “the energy shock could intensify further” and that its inflationary effects had not yet fully materialised. In Washington, the House of Representatives passed a symbolic resolution calling for an end to the war without congressional authorisation, though a parallel measure stalled in the Senate, reflecting growing unease among some Republicans but no binding constraint on the executive.

Diplomatic channels remain open but unproductive. Two regional sources told Axios that Iranian leaders have not accepted the latest mediation proposal, while Trump insisted Tehran “hasn’t received enough pain yet” to negotiate seriously. UN Secretary-General António Guterres told the Security Council the situation was “teetering on the edge of the unimaginable.” With both the Strait of Hormuz and Bab el-Mandeb under simultaneous pressure, analysts at Goldman Sachs warned that Brent could exceed $120 a barrel in the fourth quarter if disruptions persist. The next scheduled Federal Reserve meeting on 28-29 July is now being watched for any signal that energy-driven inflation could alter the rate path.