February 29, 2024
Oil Prices Surge Following Red Sea Attacks
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Oil Prices Surge Following Red Sea Attacks

Oil prices shot up three percent yesterday as more companies suspended shipping through the Red Sea following attacks on vessels by Yemen’s Iran-backed Huthi rebels.

Yemen’s Iran-backed Huthi rebels said yesterday that they had attacked two “Israeli-linked” vessels in the Red Sea, the latest in a flurry of drone and missile strikes on vessels entering the waters, which are aimed at pressuring Israel over its war with Hamas in the Gaza Strip.

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Five of the world’s six largest shipping companies have announced they will not send ships through the Red Sea. Yesterday, British oil giant BP, and Taiwan’s Evergreen became the latest to suspend transit. Ships must travel through the Red Sea to use the Suez Canal, a key transit route for cargo and oil.

Market analyst at CMC Markets, Michael Hewson, says that given the importance of the Red Sea and Suez Canal as a crucial transit point for both crude oil and natural gas, these suspensions mean that cargos face a lengthy diversion around the Horn of Africa which will add significant costs to company supply chains, as well as having significant inflationary impacts.

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