Separate attacks raise tensions in the Middle East, sending oil prices higher

Separate attacks in the Middle East, including the death of a U.S. soldier in Jordan and the collision of a fuel tanker in the Red Sea, pushed up oil prices and heightened tensions in the region, which accounts for about a third of the world's oil production.

The White House said Iranian-backed militants killed three soldiers and injured others in a drone strike, which Tehran denies. This follows a Houthi missile attack on Friday on a Trafigura Group consignment vessel transporting Russian fuel, the most important energy carrier to date.

Brent crude rose as much as 1.5% in early Asian trading, but the gains have since been largely offset. This comes after the global index rose more than 6% last week, its biggest rise since October. West Texas Intermediate rose towards $79 a barrel and diesel futures in London rose nearly 5%.

Vishnu Varasan, chief economist for Asia (ex-Japan) at Mizuho Bank, said the oil market is “exposed to supply-side risks.” As geopolitics takes shape, there may be further upside risks to oil prices. ”

The death of a U.S. soldier in the first enemy attack since Israel and Hamas went to war increases pressure on President Joe Biden to confront Iran directly, raising the risk of escalating conflict in a region vital to global trade. will be exposed to. The attacks on tankers came after prior assurances by the Houthi militants, who primarily targeted ships with ties to Israel, the US and the UK, with shippers assuming ships with ties to Russia and China would sail safely. Because of this, the result was consequential.

Brent has risen about 9% this month as tensions in the Middle East have escalated, but it remains well below levels immediately after Hamas attacked Israel in October. Strong supplies from non-OPEC producers and the prospect of slower demand growth are helping to keep prices down. Additionally, the attacks in the Red Sea have caused some cargo routes to be rerouted and freight rates to rise, but this has not yet caused shortages or affected production.

Biden has vowed to retaliate for the killing of U.S. troops near the Syrian border, and some Republicans have urged him to launch an attack on Iran, a level the U.S. says it wants to avoid.

A spokesperson for Trafigura said the ship attacked by the Yemen-based Houthi rebels was using Russian naphtha, a product used to make plastics and gasoline, purchased below the ceiling price imposed by G7 countries. ). The strike took place on board the Merlin Luanda.

“No party wants a full-scale war,” said John Kilduff, founding partner of Again Capital LLC. “Oil is still flowing, oil fields are not being targeted and ships are still visible passing through the Suez Canal.”

© 2024 Bloomberg