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Tuesday April 16, 2024

Oil surges massively amid US, UK strikes on Houthis — What does it mean for petrol prices?

World oil prices have risen following attacks by US, UK targeting Houthis in Red Sea

By Web Desk
January 12, 2024
Yemenis wave flags and chant slogans during a pro-Palestinian march in the Houthi-controlled capital Sanaa on December 8, 2023. — AFP
Yemenis wave flags and chant slogans during a pro-Palestinian march in the Houthi-controlled capital Sana'a on December 8, 2023. — AFP

While equities increased on Friday due to US inflation data that supported investors' belief that interest rates could soon drop, the price of oil surged as the growing unrest in the Red Sea region threatened to further impede global trade.

After the United States and Britain announced that they had initiated air and naval operations against Houthi military targets in Yemen in response to the group's attacks on ships in the Red Sea, which resulted in a dramatic regional escalation of the Israel-Hamas war in Gaza, oil prices surged by 4% according to Reuters.

US West Texas Intermediate (WTI) crude increased 4.1% to $74.49, while Brent futures were up 4% at $80.52 a barrel.

"Oil prices have climbed sharply following the attacks, with Brent Crude now around 7% higher since early December, before Houthi rebels began targeting ships in the Red Sea," Susannah Streeter, head of money and markets at Hargreaves Lansdown, said.

"Reports coinciding with the UK/US military action suggest the British government is modelling scenarios which could see prices rise by $10 a barrel, if the Red Sea crisis continues, with gas prices at risk of going up by 25%," she added.

In the meantime, hopes of a decline in interest rates supported a rally in world equities. A rebound in Europe was reflected in the 0.7% increase in the STOXX 600, which was partially driven by a surge in shares of aerospace and defence businesses, whose sector index reached a record high. The MSCI All-World share index was up 0.2%.

While government bond yields marginally decreased, US stock futures dipped 0.2%, indicating investor appetite for safe-haven assets.