In a significant development, oil prices witnessed a 2% increase on Friday following air and sea strikes by the United States and Britain on Houthi military targets in Yemen.
This military response was prompted by the Iran-backed group’s attacks on shipping in the Red Sea, heightening concerns in the market about the potential impact of a broader conflict in the Middle East on oil supplies, particularly those traversing the critical Straits of Hormuz.
Energy analyst Saul Kavonic from MST Marquee expressed apprehension about the consequences of a potential halt in a large part of the Strait of Hormuz flows. He emphasized that such an event could have up to three times the impact of the oil price shocks in the 1970s and over double the impact of the Ukraine war on gas markets. This comes at a time when supply chains and stock levels are already delicate.
As of 0728 GMT, Brent crude futures registered a $1.52 increase, reaching $78.93 per barrel, representing a 2% rise. Concurrently, U.S. West Texas Intermediate crude futures were $1.43 firmer, also up by 2%, reaching $73.45. Thursday had already seen both benchmarks rise nearly 1%, indicating a second consecutive weekly increase.
The air and sea strikes by the U.S. and Britain mark one of the most striking demonstrations of the expanding Israel-Hamas conflict since its outbreak in October. Witnesses in Yemen reported explosions throughout the country.
U.S. President Joe Biden underscored that these “targeted strikes” send a clear message that the United States and its partners will not tolerate attacks on its personnel or permit hostile actors to jeopardize freedom of navigation.