Oil prices experienced a notable increase in the week ending March 21, 2025, primarily driven by escalating tensions in the Middle East, newly imposed U.S. sanctions on Iranian crude exports, and China’s ambitious economic stimulus measures. The international benchmark of Brent crude oil traded at $71.22 per barrel at 2:02 p.m. local time (1102 GMT) on Friday, marking an increase of approximately 1.4% from the previous week’s closing price of $70.24 per barrel. Similarly, the American benchmark, West Texas Intermediate (WTI), stood at $67.78 per barrel at the same time, reflecting a rise of about 1.3% from the closing rate of $66.91 just a week prior.
A crucial contributing factor to these rising prices is the ongoing conflict in Yemen. On Thursday, March 20, the Houthi group announced that U.S. warplanes had conducted four airstrikes in Yemen’s Al-Hudaydah province, a strategic coastal hub that contains an international airport and three vital ports. These strikes follow U.S. President Donald Trump’s declaration of a ‘major attack’ against the Houthis announced on March 15, 2025, leading to a spike in American airstrikes. Houthi reports indicate that this escalation has resulted in 53 fatalities and 107 injuries, including among women and children, marking the first American aerial assaults on Yemen since the Israel-Hamas ceasefire commenced on January 19, 2025.
The Houthi forces have also been active in targeting vessels linked to Israel in both the Red Sea and Gulf of Aden since late 2023, claiming these actions are expressions of solidarity with Gaza amid the ongoing conflict. Although they ceased hostilities following the aforementioned ceasefire, they have recently threatened to revitalize operations after Israel obstructed humanitarian aid into Gaza on March 2, 2025. The heightening risk to maritime security within the Red Sea has raised global concerns regarding potential disruptions to oil supply and prices.
Simultaneously, U.S. sanctions imposed on Iran further fueled the upward trajectory of oil prices by creating supply uncertainties among market participants. The Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions on March 20, targeting specific entities involved in Iranian oil exports. According to the OFAC, the sanctions included designating ‘a teapot oil refinery and its chief executive officer for purchasing and refining hundreds of millions of dollars’ worth of Iranian crude oil, which is linked to the Foreign Terrorist Organization Ansarallah (the Houthis) and the Iranian Ministry of Defense and Armed Forces Logistics (MODAFL).
Treasury Secretary Scott Bessent emphasized that the purchases made by teapot refiners represent the Iranian regime's primary economic lifeline, succinctly labeling Iran as the “world’s leading state sponsor of terror.” Furthermore, the U.S. has blacklisted a Chinese oil terminal that allegedly purchased and stored Iranian crude, intensifying the scrutiny of foreign players in the Iranian oil market.
Teapot refiners are primarily private Chinese companies that traditionally purchase Iranian oil, making this sanction significant as it marks the first designation of such a refinery by the United States. The sanctions also encompassed 19 additional entities and vessels linked to Iran's ‘shadow fleet’.
On the demand side of the equation, expectations of enhanced consumption from China, the world’s largest crude importer, are encouraging price increases. Following the announcement of a sweeping stimulus package on March 16 aimed at bolstering domestic consumption, optimism regarding a rise in oil demand has surged. This blend of geopolitical challenges and revitalized Chinese consumption is proving to offset some bearish pressures on supply within the volatile oil markets.
As the world watches, oil markets are navigating a landscape defined by instability and uncertainty, particularly as tensions in the Middle East continue to play a pivotal role in global energy prices. With significant dangers surrounding maritime security and the potential for further sanctions or military actions, the implications for both regional and international markets remain critical.
