- The US and Britain launched airstrikes against Houthi rebels in Yemen on Thursday.
- Oil prices rose 3% as traders worried over rising tensions in the Middle East.
- Analysts have warned that the West’s retaliatory action is likely to increase market volatility.
The US, Britain and other allies launched airstrikes against Iran-linked Houthi rebels in Yemen on Thursday — and Wall Street worries the move by the Western coalition could send oil prices soaring in the coming months.Thank you for reading this post, don't forget to subscribe!
Crude oil benchmarks rose in early morning trading as analysts warned there could be more rallies ahead as concerns over the Middle East grow and the market grapples with production cuts by the OPEC+ cartel.
The US is trying to prevent the Houthis from attacking international shipping lanes in the Red Sea, which has increased container costs and disrupted goods trade between Asia and the West.
Here’s how air strikes could affect markets and the global economy.
surge in oil prices
Two key oil-price indicators, Brent and West Texas Intermediate, climbed more than 3% on Friday as traders weighed how US retaliation against the Houthis could affect commodity markets.
Investors have been nervously watching crude oil since Hamas attacked Israel on October 7, although prices have since declined on signs of slowing global demand.
If Friday’s rally continues until the closing bell, it will be the first time since mid-November that Brent and WTI have jumped more than 4% in a single day, according to Dow Jones data.
Rising oil benchmarks could push up the price of gas and other crude-related products — so bigger swings could hit U.S. inflation, which has calmed in the past year but still ran at a higher-than-expected 3.4% on Thursday. She has arrived. ,
Energy stocks also rose in premarket trading, with WEC Energy, Halliburton and Occidental Petroleum all climbing 2% before the opening bell.
Analysts warned that oil-market volatility is likely to increase in the wake of US attacks on Houthi ships.
“Air strikes on Houthi targets in Yemen have increased [traders’] Anxiety,” said Sophie Lund-Yates, of Hargreaves Lansdowne. “There seems to be little change in oil prices at the end of the week, but the risk of volatility has increased significantly.”
That being said, factors beyond the Middle East are also influencing crude. Saudi Arabia and Russia have made aggressive output cuts in recent months to prop up prices, which are set to crash in the final quarter of 2023 due to a perceived slowdown in global demand.
Giovanni Staunovo, a commodities strategist at UBS, said in a research note on Friday that the bank expects Brent to remain at its current level of more than $80 a barrel – but he added that “any risk premium will only be sustained if There will be disruption in oil supplies.”
US attacks could have a huge impact on global trade. Major shipping companies including Maersk and MSC have diverted their ships away from the Suez Canal due to the Houthis’ presence in the Red Sea, and Thursday’s development could further disrupt international trade, according to supply-chain experts.
“Yesterday’s military action by the US and UK shows that this is not an issue that will go away quietly,” Proxima’s Matthias Menck said in email comments.
“The longer this continues, the more disruption we can expect for businesses and consumers,” he said. “The business community will be watching closely to see if this triggers an escalation and potentially worsens the outlook for international trade.”