Brent crude, the global oil benchmark, rose 59 cents to $74.52 a barrel in early morning market trading, while US West Texas Intermediate (WTI) crude features were also up six cents at $69.36.
Saudi Energy Minister Khalid al-Falih had said the Houthi movement – a group of Iran-backed Yemeni rebels – had attacked two Saudi Very Large Crude Carriers (VLCCs) in the Red Sea on Wednesday morning.
A statement issued by Mr al-Falih’s ministry said that both tankers that were attacked were operated by Saudi shipping company Bahri, which had earlier said that one of its VLCCs had suffered minor damage in an incident in the Red Sea, without elaborating.
The statement read: ”Saudi Arabia is temporarily halting all oil shipments through Bab al-Mandeb Strait immediately until the situation becomes clearer and the maritime transit through Bab al-Mandeb is safe.”
Mr al-Falih added: “The two million barrels capacity for each tanker were full of crude oil cargo at the time and were headed for export. One of the VLCCs sustained minimal damage.
“Fortunately, there were no injuries or oil spill that would have resulted in catastrophic environmental damage. Efforts are currently underway to move the damaged ship to the nearest Saudi port.”
Oliver Jakob, from oil market analyst PetroMatrix, said in a note the Saudi move will have a significant impact.
He said: “The passage is not as crucial as the Strait of Hormuz, but restricted flows through it would have an impact not just for crude but also for products due to the longer voyage time that is needed to sail by the Cape.”
The Saudi coalition intervened in Yemen’s civil war in 2015 to restore the internationally recognised government of exiled president Abd-Rabbu Mansour Had. Saudi Arabia accuses regional arch-foe Iran of supplying missiles to the Houthis, which both Tehran and the Houthis deny.
The Western-backed coalition of Sunni Muslim states which Saudi Arabia leads launched an offensive in June to wrest Yemen’s main port of Hodeidah from the Houthis in a bid to cut off the primary supply line of the movement, which holds the most populated areas of Yemen including the capital Sanaa.
The Houthis, who have also launched missile attacks on Saudi cities, including the capital Riyadh, have threatened to block the strait of Bab al-Mandeb several times to force the coalition to stop its air strikes.
Saudi Arabia is the world’s biggest exporter and has a major terminal in Ras Tanura, which is also home to the country largest refinery – on the eastern coast.
It exports most of its crude oil on tankers passing through the Strait of Hormuz.
Most exports from the Gulf that transit through the Suez Canal and the SUMED pipeline, and also pass through the Bab al-Mandeb straight.
According to the US Energy Information Administration, an estimated 4.8 million barrels per day of crude oil and refined petroleum products flowed through this waterway in 2016 towards Europe, the US and Asia.
But Saudi Arabia additionally has the East-West Pipeline, which mainly transports crude from fields clustered in the east to Yanbu for export to Europe and North America.