Oil Latest: Brent Rises as Much as 2.5% on Airstrikes

Oil jumped as the US and allies launched airstrikes against Houthi rebels in Yemen. Brent rose as much 2.5% to above $79 a barrel as investors tried to gauge the chance of the escalation in hostilities sparking a broader conflict in the Middle East. Bloomberg’s Stephen Stapczynski reports.

Read more on this story here: https://www.bloomberg.com/news/articles/2024-01-12/brent-oil-hits-80-after-airstrikes-target-yemen-s-houthis
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What do you make of this market reaction to these strikes when it comes to oil and energy? You know, to be absolutely honest, this reaction is, I think, smaller than some people expected. Yes. This is a jump. Yes, prices are up over 2%. But if this had happened maybe a year

Ago or two years ago, you would have seen a much greater reaction when the market was more on edge. In the past, these sorts of geopolitical events would usually see larger spikes by a 2%. While it is small, it is a rise. And while there is stress and the war

Premium is being built back into Brent crude and WTI prices isn’t reacting the way that they had in the past, I think that’s mostly because there is this tug of war, as one analyst said, between the war risk and also just

The fundamentals of the oil market. Things are looking a bit frothy in the oil market at the moment. Supply is pretty strong out there. And it’s not just OPEC Plus and Middle Eastern supply. It is supply out of the United States. It’s that shale supply that has remained

Pretty strong. So while this tension in the Middle East could wind and and bring in other producers and affect supply and trade of the fuel, I think you’re looking immediately at the fundamentals. No oil production has been affected yet. Red Sea travel, while there are there is

A risk that that could continue to be disrupted. Overall, you are looking at a market that is a bit oversupplied and a bit more bearish when you look at it. Yes. So, Stephen, so what we’re looking at right now is a risk that more oil and

Other energy products have to take the long way round rather than going through the Suez Canal. But what we’re not talking about is the closure of the Straits of Hormuz or disruption to a third of the world’s waterborne oil exports. But if we were talking about that,

That’s where the risks lie, I guess. Absolutely. You hit the nail on the head. That is the big risk, right? So if there is this tension, this proxy war kind of spinning out between the United States and Iran and Iran decides to

Halt the Strait of Hormuz, that would have an enormous impact, not just on oil prices. And you could see oil prices spike. And one analyst said that that could be worse than the oil crisis of the 1970s. That’s an absolute worst case scenario. Now, that is still just a risk, right?

Iran isn’t threatening to do that. We’re not seeing at the moment. But if this tension between the US and Iran does escalate, that is something that could happen. That’s one of those risks that the market is going to have to price in. And again, as you mentioned, that’s not

Just oil, that’s liquefied natural gas that’s going to affect exports of LNG from Qatar to the rest of the world. They have to take that vital waterway to get the LNG to Europe, to Asia. And Qatar is the world’s biggest exporter of LNG. So that would affect an enormous amount

Of supply and that would have a huge impact. But still, we’re not there yet. That’s going to be something that the market is going to be monitoring very closely, especially as we get responses from Iran and the United States.