Oil Advances as Iran Sends Warship to Red Sea

Oil rose after Iran sent a warship to the Red Sea in response to the US Navy’s sinking of three Houthi boats over the weekend, adding to tensions as ships continue to avoid the key waterway.

The move could be seen as a challenge to the US-led maritime task force established last month to halt attacks on ships by the Tehran-backed Houthi rebels who control a swath of Yemen’s northwest, including the capital Sanaa and the Red Sea port of Al-Hudaydah.

Brent crude climbed above $78 a barrel after declining by 5% over the prior three sessions, with West Texas Intermediate near $73.

The US Navy said it was fired upon when responding to a distress call from a vessel in the Red Sea, resulting in the sinking of the three boats.

Operation Prosperity Guardian, involving the navies of the US and nine other nations, swung into action from Dec. 19 and had a fierce encounter with the militants on Sunday.

Helicopters aboard two US destroyers in the Red Sea, the USS Eisenhower and the USS Gravely, responded to a distress call by the Maersk Hangzhou as Houthis in four speedboats tried to board the vessel, according to the US military. Houthi fighters ignored verbal warnings, fired at the aircraft and triggered a lethal response in which three of the boats were sunk.

A Houthi spokesperson, Yahya Saree, confirmed the incident and said 10 of the group’s fighters were dead or missing. He called on Yemenis, Arabs and Muslims to be “ready for all options in confronting the American escalation.”

In response, Iran’s Alborz destroyer entered the vital waterway on Monday, state media said.

Crude’s gains follow the first annual decline since 2020, after a tumultuous year dominated by concerns over increasing production outside OPEC+ and slowing demand growth. That was offset by bullish factors including the wars in Gaza and Ukraine, and signs that the Federal Reserve is done raising interest rates.

A Houthi delegation met with officials in Tehran after the US response to the attack on a Danish-owned container ship. AP Moller-Maersk A/S has again suspended all Red Sea transit to assess the situation in the vital waterway.

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