A Saudi oil tanker called the Encelia is on fire in the Red Sea right now, Houthi rebels are bragging about it, and Brent crude just crossed $100 a barrel for the first time since late May. Gas is $4.09 a gallon nationally as of Thursday morning. And the guy in the White House is threatening to blow up Iranian infrastructure on social media. Everything is completely fine.
What Actually Happened in the Red Sea
Tehran-backed Houthi rebels claimed attacks on two Saudi oil tankers on Wednesday, following their earlier announcement of a naval blockade on Saudi Arabia. The United Kingdom's Maritime Trade Office reported a tanker struck by an unknown projectile north of the Bab el-Mandeb strait. Saudi state media, citing the General Authority of Transport, confirmed the tanker Encelia was set ablaze while sailing overnight in the Red Sea.
This matters beyond the obvious reason that ships are on fire. According to NBC News, this appears to be the first time since the broader Iran war began that ship attacks have spread beyond the Strait of Hormuz, opening an entirely new front in an already volatile conflict. The Houthis are not just threatening one chokepoint anymore. They are threatening two of them simultaneously.
The Bab el-Mandeb strait, which sits between Yemen and the Horn of Africa, is not some obscure waterway. Roughly 12 to 15 percent of all global maritime trade passes through it every year, worth more than a trillion dollars. Millions of barrels of oil transit it daily. When that route gets sketchy, markets do not wait around to see how it plays out.
Oil at $100 and Climbing
Brent crude, one of the two key global oil benchmarks, rose more than 6% on Thursday morning to cross $100 per barrel, its highest point in eight weeks, NBC News reports. U.S. crude jumped more than 5% to nearly $92 per barrel, its highest level since June 11. These are not small daily fluctuations. This is a market in genuine panic mode.
Zoom out and the picture gets uglier. Since the start of July alone, oil prices have risen about 35%, according to NBC News. Since January 1, they are up more than 60%. Sixty percent. In seven months. If your grocery bill, your utility bill, and your gas bill all feel like they are quietly strangling you, this is a significant part of the reason why.
Deutsche Bank's global head of macro research, Jim Reid, put it plainly Thursday morning: "The strikes between the US and Iran show no sign of easing, and the Houthis said they targeted two oil tankers in the Red Sea yesterday, raising fears that the conflict is widening." When the big German bank is using the word "fears" in their morning note, it is usually not posturing.
The Deal That Collapsed
Here is the part that should make you furious. Back in mid-June, the United States and Iran signed a memorandum of understanding, and for a brief moment oil prices started coming down. It was not a peace deal, but it was something. Markets exhaled. Gas prices ticked lower.
That is gone now. NBC News reports the deal has fully collapsed. On Wednesday, President Trump threatened to blow up an Iranian bridge or power plant for every vessel attacked by Tehran. Hours after that threat, the Houthis claimed they hit two tankers in the Red Sea. Whether the threats accelerated the attacks or were simply ignored, the outcome is the same: diplomacy is dead and the ships are burning.
There is a term for announcing military escalation via threat before it happens, and that term is not "strategy." It is a public negotiating position that tells your adversary exactly what upsets you and dares them to keep doing it. The Houthis, who have been doing this for years and have very little left to lose, appear to have taken the dare.
Your Wallet, Specifically
The national average gas price hit $4.09 per gallon on Thursday, up from $4.06 Wednesday, according to AAA data tracked by NBC News. That is painful on its own, but the downstream effects go well beyond the pump.
Bond yields are rising alongside oil. The U.S. 10-year Treasury was trading at 4.67% Thursday morning, its highest level since January 2025, NBC News reports. That bond rate has an outsized influence on consumer borrowing costs across the board. On Wednesday, the average 30-year mortgage rate climbed to 6.77%, the highest it has been since July 2025. So if you were one of the millions of Americans waiting for rates to come down enough to buy a house, the Red Sea just pushed that timeline further out.
Inflation, which had been slowly grinding down, now has a fresh accelerant poured on it. Higher oil means higher shipping costs for everything that ships, which is everything. Deutsche Bank flagged inflation as "top of the agenda for markets" Thursday morning. When markets are worried about inflation, the Federal Reserve is watching, and when the Fed is watching, interest rate cuts get shelved.
The Strait of Hormuz Is Already a Disaster
The Red Sea escalation is happening at the same time the Strait of Hormuz is essentially paralyzed. Ship crossings there fell to single digits on Tuesday, NBC News reports. Single digits. The Hormuz strait is how roughly 20% of the world's oil supply reaches global markets under normal conditions. Normal conditions are not currently in operation.
The Bab el-Mandeb strait had been serving as an alternative route, the way traffic gets rerouted around a closed highway. Now that alternative is under active attack too. There is no third route here. Oil either goes through one of these two chokepoints or it goes around the entire continent of Africa, which adds weeks to transit times and significant costs. Markets are pricing in the possibility that neither route is reliable, and that is how you get Brent crude at $100 a barrel before breakfast on a Thursday in July.
The Dingo Take
Let's be direct about what is happening here. The United States is involved in an escalating war with Iran, Houthi rebels are now attacking ships in two separate critical waterways simultaneously, and the American president's response was to threaten infrastructure strikes in public, on the record, before actually doing anything. Oil is at $100 a barrel. Gas is $4.09. Mortgage rates just hit their highest point in a year. The deal that briefly gave markets some relief is dead.
The people who are going to feel this first and hardest are not Deutsche Bank analysts. They are the people filling up their tanks to get to jobs that do not pay enough, watching their grocery bills climb, locked out of a housing market that keeps getting more expensive every time some crisis halfway around the world rattles the bond market. That is who pays the price for a foreign policy that lurches between threats and collapsed agreements.
The Houthis have been a destabilizing force in that region for years, and there are no easy answers for how to deal with them. But announcing what will happen if they keep attacking ships and then watching them attack more ships within hours is not deterrence. It is a demonstration that the threats are not working. At $100 a barrel, the cost of that failure is landing on every American with a car, a mortgage, and groceries to buy.
