Houthi Red Sea blockade pushes Brent crude past US$105

By Simon Wu · 2026-07-28

The chokepoint: blockade and strikes tighten global supply

Mahdi al-Mashat, chairman of the Houthi-led Supreme Political Council, declared the Bab el-Mandeb Strait closed to Saudi-linked shipping in late July 2026, framing the move as retaliation for Saudi Arabia's blockade of Yemen.^[1] Al-Mashat left no ambiguity about his terms: "Nothing short of ending the aggression and lifting the blockade, otherwise, it's all illusion and mirage," he said. The Bab el-Mandeb is one of the world's narrowest oil transit corridors, connecting the Red Sea to the Gulf of Aden and on to European and Asian markets.

That disruption has landed on top of production cuts already under way across the Middle East. Middle Eastern producers cut output by more than 11 million barrels per day, causing inventories held by Organisation for Economic Co-operation and Development nations to draw down by 6.3 million barrels a day in the second quarter of 2026 and 7.6 million barrels a day in the third quarter.verifiedVerified Source: eia.gov^[2] The combined effect has been a sharp repricing of crude across global markets.

From US$79 to US$105: the price mechanics

Brent crude spot prices averaged US$105 a barrel across June and July 2026, according to the United States Energy Information Administration, up from roughly US$79 a month earlier.^[2] Tristan Abbey, Administrator of the U.S. Energy Information Administration, said the market has already partially restructured: "Any scenario involving full restoration of inventories, production, and trade flows to pre-conflict levels must account for the partial restructuring of the global oil market that has already occurred," he said.verifiedVerified Source: eia.gov^[2]

Australian wholesale petrol prices do not track crude directly. The Australian Competition and Consumer Commission and the Reserve Bank of Australia monitor the Singapore Mogas 95 Unleaded benchmark, published daily by Argus Media, as the reference price for domestic wholesale unleaded petrol.^[5] A refining margin, a currency conversion and a freight cost all sit between a Brent crude spike in the Red Sea and the number on the pump outside a Sydney servo. When crude rises sharply, each of those layers can amplify or delay the pass-through, but none of them can shield consumers from a sustained global shock of this scale.

Australia's structural exposure: imports, thin stockpiles and expiring relief

In 2023-24, 79 per cent of Australia's refined petroleum product consumption was met by imports, the highest share on record.verifiedVerified Source: energy.gov.au^[3] Australia has dismantled most of its domestic refining capacity over the past decade, leaving it structurally dependent on imported product priced off Singapore benchmarks. When those benchmarks jump, there is almost nowhere else to turn.

The stockpile position sharpens that exposure further. On average in 2024-25, Australia held oil stocks equivalent to just 50 International Energy Agency days of net imports, forty days below the IEA's 90-day member obligation.^[4] A prolonged disruption to Red Sea shipping lanes could draw those stocks down faster than they can be replenished through longer Cape of Good Hope routing, which adds roughly two weeks to voyage times from the Persian Gulf.

Layered on top of the global shock is a domestic fiscal cliff. The federal government legislated a fuel excise discount that tapers from 32 cents per litre to 16 cents per litre from 1 July 2026, before expiring entirely after 2 August 2026.^[7] Drivers already absorbing the crude-price surge will face that additional cost at the bowser within weeks, regardless of what happens in the Red Sea.

What households can do right now

The ACCC has documented well-established weekly retail price cycles in Australia's major cities, where pump prices typically rise and fall once per week.^[6] Timing a fill-up to the low point of that cycle, which varies by city but is broadly predictable using state-based fuel price apps, is the most straightforward way for households to cut their exposure. The ACCC identifies this as the primary lever available to individual consumers when underlying wholesale prices are elevated.

Beyond timing, the structural options are limited. Fuel efficiency, reduced discretionary driving and, where practical, switching to electric or hybrid vehicles address the exposure over the medium term. In the near term, the weekly cycle remains the most accessible tool for Australians filling up while Brent crude holds above US$100 a barrel.

The strategic question: IEA obligations and what comes next

Australia's fuel security framework has drawn sustained scrutiny because the country's stockpile sits so far below its IEA commitment. The Department of Climate Change, Energy, the Environment and Water publishes quarterly measures of liquid fuel stocks, and the 50-day figure for 2024-25 is a matter of public record.^[4] A crisis that draws on those reserves rapidly would leave Australia negotiating emergency access from allies at a moment when global supply is already constrained.

Abbey told reporters that restoring pre-conflict market conditions is not simply a matter of reopening shipping lanes. The restructuring of supply relationships, refining capacity and trade flows since hostilities escalated means the path back to US$79 crude is neither short nor guaranteed.^[2] For Australian motorists, the convergence of a Red Sea blockade, a 50-day stockpile and an expiring excise discount in the northern winter of 2026 is the defining fuel-cost stress test of the decade, with that excise cut ending on 2 August 2026.

Simon Wu

Simon Wu writes about Asia-Pacific markets and China's economy. He reads the Chinese-language financial press closely and looks for the stories that reach Australia before anyone here notices.