Oil rises as geopolitical tensions rise

Oil rose as the United States and its allies launched airstrikes against Houthi rebels in Yemen. Oil rose as the United States and its allies launched airstrikes against Houthi rebels in Yemen and stepped up retaliation for attacks on ships that have blocked the flow of fuel and goods through the vital Red Sea waterway. U.S. President Joe Biden said the strikes on a series of targets used by the Iran-backed group were successful. U.S. officials said radar sites and missile launchers were hit. Global benchmark Brent crude rose 2.5% to above $79 a barrel as investors tried to gauge whether the strikes would spark a wider conflict in the Middle East. The Houthis launched their biggest-ever attack on shipping in the Red Sea earlier this week, despite the presence of U.S.-led naval forces, prompting Washington’s warnings of retaliation. Iran also seized a tanker off the coast of Oman on Thursday, further exacerbating the situation. The Houthis have fired missiles at ships almost daily for the past two months and have said they will not relent until Israel ends its offensive on Gaza. The biggest danger to prices is if Iran is drawn directly into the conflict, which could threaten production and flows in a region that is the source of about a third of the world’s crude. That would reintroduce a war risk premium to a market that has been weakened by rising non-OPEC+ supply and slowing demand growth. “The escalation of the conflict does indicate the potential for greater disruption and the need for ships to reroute. But the greater risk is if this spreads and we start to see threats to flows from the Persian Gulf. While we believe the risk of this is low, the impact will be significant,” said Warren Patterson, head of commodities strategy at ING Group.