Oil prices were climbing Friday after a U.S.-led coalition launched strikes on Houthi rebel targets in Yemen. While the strikes were intended to reduce the threat to international shipping, they could escalate conflict in the Middle East.
The strikes were conducted late Thursday by U.S. and British forces and supported by Australia, Bahrain, Canada, and the Netherlands. The coalition said they were intended to disrupt the Houthis’ ability to threaten global trade in the Red Sea.
“I will not hesitate to direct further measures to protect our people and the free flow of international commerce as necessary,” U.S. President Joe Biden said in a White House statement.
The strikes followed a string of attacks on vessels transiting the Red Sea by the Houthis. Meanwhile, Iran’s navy said Thursday that it had seized an oil tanker off the coast of Oman.
Brent crude, the international oil standard, rose 3.0% to $79.74 a barrel early Friday. West Texas Intermediate, the U.S. benchmark, was up 3.1% at $74.21 a barrel.
Analysts at UBS said their forecast calls for Brent crude to be in the range of $80-$90 a barrel this year.
The major concern continues to be a significant escalation of violence in the Middle East amid tensions provoked by the Israel-Hamas conflict. Iran is a significant producer of oil, as is Saudi Arabia. The Iran-backed Houthi rebels previously attacked oil infrastructure in Saudi Arabia.
The Iranian tanker seizure happened close to the Strait of Hormuz, a chokepoint where more than 20 million barrels of oil a day is transported, equivalent to around 20% of global consumption, according to ING.
“For now, we believe the risk of significant disruption to oil flows from the Persian Gulf is low, but it is certainly worth keeping an eye on, given the potential impact it could have on oil supply and prices,” ING analyst Warren Patterson wrote in a research note.
Write to Adam Clark at adam.clark@barrons.com
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