Crude oil prices jump 4% as tankers avoid Red Sea after US-UK strikes on Houthis

A worker collects a crude oil sample at an oil well operated by Venezuela’s state oil company PDVSA in Morichal, Venezuela, July 28, 2011. REUTERS/Carlos Garcia Rawlins/File Photo

The overnight air and sea strikes by the United States and Britain on Houthi targets in Yemen have diverted course of oil tankers from the Red Sea which has now resulted to surge of 4 per cent in crude oil prices on Friday.

Brent crude futures were up $3.16, or 4.1 per cent, at $80.57 a barrel at 1124 GMT (around 4:30 pm IST), while US West Texas Intermediate crude futures climbed $3.05, or 4.2 per cent, to $75.07.

Both benchmarks were on path for a second straight weekly rise.

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After the US and UK strikes, market concerns have risen with investors expecting that the Israel-Hamas war may widen into a broader conflict in West Asia, affecting oil supplies from the region, especially those moving through the critical Strait of Hormuz.

“If a large part of Strait of Hormuz flows were to be halted, it would present up to three times the impact of the 1970s oil price shocks and over double the impact of the Ukraine war on gas markets, atop already fragile supply chains and stock levels,” Reuters quoted Saul Kavonic, an energy analyst at MST Marquee, as saying.

More than 20 million barrels of oil move through the Strait of Hormuz each day which is equivalent to around 20 per cent of global consumption, the report quoted ING analysts saying.

‘Will not tolerate attacks’

US President Joe Biden said the “targeted strikes” in Yemen were a clear message that the United States and its partners will not tolerate attacks on its personnel or “allow hostile actors to imperil freedom of navigation”.

Houthi vows to continue

A spokesperson of Houthis said the group will continue to target shipping heading towards Israel.

Attacks by the Houthis in the Red Sea have disrupted international commerce on a route between Europe and Asia which accounts for about 15 per cent of the world’s shipping traffic.

The Houthis have attacked commercial vessels in the Red Sea to show support for Palestinian terrorist group Hamas in its fight against Israel.

Saudi Arabia calls for restraint

Saudi Arabia, which is one of the top oil exporter and regional power, has called for restraint and “avoiding escalation”. The country said it was monitoring the situation with great concern.

Vessels being rapidly diverted

Shipping giant Maersk (MAERSKb.CO) and others have been diverting vessels away from the Red Sea, warning customers of further disruptions.

The overnight attacks by the US follow Iran’s seizure on Thursday of a tanker carrying Iraqi crude destined for Turkey south of the Strait of Hormuz.

With inputs from Reuters

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