The Brent crude oil price has soared 12.3% in just a week, and is US$108.17 per barrel on Friday.
S&P/ASX 200 Index (ASX: XJO) energy shares are up 2.7% this week, and sector leader Woodside Energy Group Ltd (ASX: WDS) has gained 3.36%.
The Santos Ltd (ASX: STO) share price has risen 5.05% and Karoon Energy Ltd (ASX: KAR) shares are up 6.32%.
The surging Brent crude oil price follows news that Iran-backed Houthi rebels have seized a key port town in Yemen.
The town, Mocha, lies alongside the Red Sea, which opens into international waters via the narrow Strait of Bab el-Mandeb.
Image source: Getty Images
Why does this matter?
The Red Sea has provided an alternative route for oil supply from Saudi Arabia to global markets during the US-Iran conflict.
The US-Iran war has led to the virtual closure of the Strait of Hormuz, the main shipping lane for Middle East oil.
About 20% of the world's oil and gas supply is shipped from Persian Gulf nations through the Strait of Hormuz to global buyers.
Saudi Arabia is the world's largest oil exporter and a US ally.
On its east side is the Persian Gulf and Strait of Hormuz. On its west side is the Red Sea and Strait of Bab el-Mandeb.
The Saudis have been piping oil across their territory to the west coast for shipping via the Red Sea.
This alternative oil export route has offset the impact of the prolonged Strait of Hormuz shut down on western nations.
The oil flow contributed to the Brent Crude oil price returning to pre-war levels in June amid hopes of a US-Iran deal.
The Strait of Bab el-Mandeb sits at the southern end of the Red Sea and runs alongside Yemen.
The Houthis want to block passage to give Iran further leverage in its conflict with the US.
Saudi Arabia has been attacked by Iran several times as retribution for US attacks on Iran.
What's happened this week?
Mocha is the second Red Sea coastal city now controlled by Houthis in defiance of the internationally-backed Yemeni government.
There are concerns they will now move further south and seek to take Dhubab and Perim, which sit alongside Bab el-Mandeb.
Trading Economics analysts said the 12% rise in the Brent Crude oil price was the biggest weekly increase since mid-July.
And with no end to the US-Iran conflict in sight, the oil price may remain elevated for some time.
The analysts commented on Friday:
Top US officials reportedly warned President Donald Trump that the war could continue through the remainder of his term, which ends in January 2029.
Meanwhile, Iranian leaders are reportedly determined to continue fighting despite mounting economic costs, viewing the conflict as an existential threat.
They also claim that Tehran has managed to rebuild its missile capabilities and could intensify attacks on US and Gulf assets if Washington escalates its own strikes.
Fighting has intensified over the past two weeks, with the US targeting Iranian oil tankers while Iran launched missiles at US warships and tankers in the Persian Gulf, as well as American assets in neighboring countries.
The US-Iran conflict has added to inflation in many nations, including Australia, through higher petrol, diesel, gas, and electricity prices.
This week's dramatic increase in the Brent Crude oil price has raised fears of further interest rate rises in Australia.
This is one of the reasons why the ASX 200 has had such a bad week, falling 3.05% in just five days.
