Brent crude hits $100 a barrel after Houthi militants struck two Saudi oil tankers in the Red Sea overnight, sending shockwaves through gilt markets and threatening to undermine Andy Burnham’s early push to cut household bills. The benchmark price crossed the milestone on Thursday afternoon for the first time since late May.
Houthi strikes on Encelia and Layla spark fires
The targeted vessels were the Encelia and the Layla, according to the New York Times. The Houthis said both ships were violating their blockade and that the strikes caused large fires on board. Saudi Arabia’s transportation authority confirmed the attack on the Encelia via state media, saying the crew was safe.
The strikes marked the first reported attacks on vessels since the Houthis announced a blockade of Saudi-linked shipping through the Bab el-Mandeb Strait, NBC Los Angeles reported. The blockade was declared in retaliation for a Saudi blockade of Yemeni ports and a reported attack on Sanaa airport. A senior Houthi official said the blockade would remain until the Saudi blockade on Yemen is lifted.
The US military carried out a 12th consecutive night of strikes against Iran on the same night as the tanker attacks, NBC Los Angeles also reported, as both sides contest control of the region’s shipping lanes.
President Trump said he would hold Iran “responsible” for the re-escalation and warned that “major military punishment” would follow, given the Houthis are backed by Tehran. US forces also struck “targets including maritime capabilities” overnight. Trump previously threatened to hit a bridge or power plant if ships in the Strait of Hormuz came under attack.
The Strait of Hormuz and the surrounding region handle more than a fifth of global oil and gas supplies. The surge in Brent crude brings prices back to the level seen in March, when US and Israeli forces launched strikes on Iran. A ceasefire agreement between Washington and Tehran in June had briefly raised hopes of normalised trading.
Brent crude hits $100 just as Burnham eyes energy relief
European natural gas futures also jumped sharply, rising to €62/MWh from a June low of €41. That move could push UK household energy costs higher towards the end of the year.
Gilts sold off on the news, lifting borrowing costs. Short-term gilt yields now price in nearly three interest rate rises over the next two years.
That backdrop complicates the position of the Bank of England. Its Monetary Policy Committee voted on 30 July to hold rates at 3.75%, with six members opting for no change and three voting to raise by 0.25 of a percentage point, according to the UK Parliament Library. The Bank had cut rates by a cumulative 1.5 percentage points between August 2024 and December 2025.
The Bank is also running down its bond holdings. Through quantitative tightening it has cut its portfolio from a pandemic-era peak of £895 billion to around £529 billion by March 2026, with a target to reduce holdings by a further £70 billion over the year to September 2026, International Banker reported. That reduced backstop makes the gilt market more sensitive to external shocks.
Burnham’s opening days in Downing Street have centred on household relief. Stripping VAT from energy bills could cut around £45 from the energy price cap from October, though economists and politicians have raised funding questions. He has also announced a cut to business rates for pubs and a £2 cap on bus fares, adding to fiscal concerns.
Economists estimate the package could take around 0.2 percentage points off CPI inflation later this year. Price growth is still expected to push past 3.5 per cent. City analysts have cautioned that the outlook for household bills depends heavily on how the Middle East situation develops.
Before leaving office, Sir Keir Starmer urged his successor to treat diplomacy as a domestic economic issue, warning that international affairs feed directly into people’s bills. The next key test will be whether Trump’s threat of military escalation prompts Tehran to rein in the Houthis or drives oil prices higher still.
