“US-Led Airstrikes in Yemen Spark Oil Price Surge Amid Escalating Geopolitical Tensions”
In a significant turn of events, the United States and its allies have launched airstrikes on more than a dozen Houthi targets in Yemen. This retaliation comes in response to a series of attacks on merchant vessels in the Red Sea, raising concerns about the stability of the region and its impact on global oil markets.
In a significant turn of events, the United States and its allies have launched airstrikes on more than a dozen Houthi targets in Yemen. This retaliation comes in response to a series of attacks on merchant vessels in the Red Sea, raising concerns about the stability of the region and its impact on global oil markets.
The airstrikes mark a substantial escalation of tensions in the Middle East, which have been simmering since the Hamas attack on Israel in early October. Following the recent developments, Brent crude oil prices experienced a notable surge of up to 2.5%, driven by fears of potential disruptions to shipping and the possibility of the conflict expanding into a broader regional conflagration.
Analysts are closely monitoring the situation and offering insights into the implications for oil markets:
UBS Group AG: Giovanni Staunovo, a commodity strategist at UBS Group AG, emphasizes that the market perceives this as an escalation of the conflict. However, he points out that any sustained risk premium will depend on actual disruptions to oil supply. UBS anticipates higher oil prices in the coming months, with Brent expected to surpass $80 a barrel, driven in part by OPEC+ production cuts keeping the market slightly undersupplied.
ING Groep NV: Warren Patterson, head of commodities strategy at ING Groep NV, notes that while the airstrikes weren’t surprising, they signal a significant escalation in the conflict. The threat to vessels and disruptions to trade flows from Houthi attacks could lead to higher oil prices, particularly if the conflict expands, posing risks to flows from the Persian Gulf.
Vanda Insights: Vandana Hari, founder of consultancy Vanda Insights, suggests that a considerable portion of the new risk premium has already been factored into oil prices. She anticipates a modest increase in crude prices but expects diplomatic efforts to prevent a full-blown regional conflagration. The fluctuation in prices is likely to persist as the situation unfolds, reflecting a delicate balance between a bearish outlook on fundamentals and a supportive Middle East risk premium.
Westpac Banking: Robert Rennie, head of commodity and carbon research at Westpac Banking Corp, highlights that the US and the UK had warned of action in response to Houthi attacks. He notes that the situation in the Red Sea has been somewhat overlooked in 2024, and if Houthi leaders follow through on their promise of a response, oil prices could see an uptick, with WTI potentially surpassing $75 a barrel and Brent exceeding $80.
Saxo Capital Markets: Charu Chanana, market strategist for Saxo Capital Markets Pte, points out that the airstrikes have elevated the risk of escalation, putting oil and haven demand in focus in the near term. The conflict’s potential escalation poses upside risks to oil prices, and market volatility could increase as various factors, including OPEC+ cuts and geopolitical tensions, come into play.
As the situation continues to evolve, the oil market remains on edge, with stakeholders closely monitoring developments in the Middle East and their potential ramifications for global energy markets.
Sources By Agencies
About The Author
