Global Impact of US and UK Strikes
Oil prices experienced a significant surge of 4% on Friday, driven by the redirection of oil tankers away from the Red Sea. The shift in course followed targeted air and sea strikes by the United States and Britain on Houthi targets in Yemen. The strikes were in response to attacks on shipping by the Iran-backed Houthi group, causing explosions reported throughout Yemen.
Brent Crude and West Texas Intermediate Soar
Brent crude futures rose by $3.16, or 4.1%, reaching $80.57 a barrel, while U.S. West Texas Intermediate crude futures climbed $3.05, or 4.2%, reaching $75.07. Both benchmarks were on track for a second consecutive weekly increase. The strikes raised concerns about the potential widening of the Israel-Hamas conflict into a broader Middle East conflict, impacting oil supplies, especially through the critical Strait of Hormuz.
Geopolitical Concerns and Market Impact
The U.S. and UK strikes added to geopolitical concerns about the region, with a focus on potential disruptions to oil supplies. Analysts highlighted the vulnerability of global supply chains and stock levels. The Strait of Hormuz, a crucial passage for oil transportation, handles over 20 million barrels per day, equivalent to around 20% of global consumption.
President Biden’s Message and Houthi Response
U.S. President Joe Biden emphasized that the “targeted strikes” conveyed a clear message that the United States and its partners would not tolerate attacks on personnel or threats to freedom of navigation. In response, a Houthi spokesperson asserted the group’s intention to continue targeting shipping heading towards Israel.
Saudi Arabia’s Call for Restraint
Saudi Arabia, a major oil exporter, urged restraint and cautioned against escalation, closely monitoring the situation. The Houthis’ attacks in the Red Sea have already disrupted international commerce on a key route between Europe and Asia, constituting about 15% of global shipping traffic.
Commercial Response: Tankers Diverted
Major shipping entities, including Maersk, are redirecting vessels away from the Red Sea, issuing warnings to customers about potential disruptions. The commercial impact of these strategic maneuvers adds to the complexities of an already tense situation.
Iran’s Tanker Seizure and Ongoing Concerns
The escalation in tensions follows Iran’s recent seizure of a tanker carrying Iraqi crude south of the Strait of Hormuz. These events contribute to heightened uncertainties, impacting the global oil market and reinforcing the fragility of geopolitical stability in the region.
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Credit: Paul Carsten