So why aren't oil prices reflecting the tension?

The answer is: they are, and the Red Sea attacks by Houthis are the only reason crude is trading as high as it is, experts say. 

The impact of the disruptions is hard to discern because of all the forces pulling oil prices down, analysts say, and oil would otherwise be trading much lower otherwise. 

If the Middle East angst wasn't a concern for markets, crude oil prices would be trading at around $70-$75 a barrel, analysts said on Wednesday when Western Texas Intermediate crude was at $77 a barrel. (Prices have since tumbled to $72 after an inaccurate Al-Jazeera headline about a ceasefire in Gaza.)

"Even though it doesn't look like it's going a lot higher, it's supporting the downside of what is looking like a little bit of fundamental weakness," oil analyst Rebecca Babin, from CIBC Wealth Management, said.

That weakness stems from slowing demand in China and a surplus of oil in the market as non-OPEC nations keep pumping more crude.

China's economy has seen sluggish economic growth post-COVID, and is expected to keep struggling as its real estate crisis continues and foreign investment in the economy dries up. Babin previously said that lackluster demand from the world's top oil importer will be the biggest threat facing oil markets in 2024.

OPEC itself is another force pulling oil prices lower as the group has mostly failed to lift oil prices by cutting output.

"Instead of saying 'Why isn't [the price] higher?' it's really saying, 'Well, if we didn't have this, we'd probably be a lot lower,'" she explained.

In an updated note on Thursday, Babin noted that a confirmed ceasefire could cause a knee-jerk reaction in oil prices to $70 a barrel for WTI crude.

"Market reaction to potential ceasefire immediately removed increased cost associated with shipping / insurance around the Red Sea ($2-3)," she wrote. "The market was not pricing in a significant reduction in supply due to escalation in the Middle East but was assigning higher shipping costs to the commodity."

Beyond that, it's important to note that the shipping chaos in the Red Sea isn't actually knocking barrels of oil off the market or leading to any kind of supply shortage. That's another reason prices haven't shot up.

"Supply technically hasn't been disrupted yet," Hunter Kornfeind from Rapidan Energy said. "Transit times are longer, which is why prices have rallied a little bit, but we're not seeing a million barrels a day of exports offline. So, I think that's why it's been largely muted so far."

Brent crude, the international benchmark for prices, would be trading for lower per barrel without the geopolitical chaos, Kornfeind explained (about $70 to $75 a barrel when prices were at $82 a barrel on Wednesday).

All else equal (China's slowdown, OPEC concerns, and other fundamental pressures), if a cease-fire isn't reached, Babin said prices of Brent crude could go up to $90 a barrel.