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Very scary news is coming out from the global market regarding crude oil prices. On Monday, there was a sharp rise in the prices of crude oil in the international market, which has increased the concern of the economies around the world. After the Strait of Hormuz, there is a possibility that the supply chain of crude oil will be badly affected due to the opening of a new front of war in the Red Sea. Fresh missile attacks on Israel by Yemen’s Houthi rebels have added fuel to the burning Middle East conflict, pushing Brent crude prices above $116 per barrel.
Entry of Houthi rebels created panic in the market
The latest tensions began when the Iran-backed Houthi movement fired several missiles targeting Israel over the weekend. The Houthis have clearly warned that they will continue their actions until the attacks on Iran and its allies are stopped. Following the announcement, benchmark Brent crude jumped nearly 3% to $115.9 in early Asian trading hours on Monday, before rising to $116.75 shortly after. At the same time, the American benchmark West Texas Intermediate (WTI) is also trading above $103 per barrel with a gain of more than 3%.
Danger like ‘heart attack’ looms on the supply route
According to market experts, this area of the Red Sea is no less than a ‘lifeline’ for the world’s energy supply. The Houthis have a track record of disrupting shipping routes, which has spooked investors. Analysts believe that if there is an attack on Saudi Arabia’s Red Sea export hub ‘Yanbu’, it will be like a ‘heart attack’ for global oil supply. This Saudi hub was currently working as an alternative to the Strait of Hormuz, but now it itself is in the missile range of the Houthis.
Donald Trump’s statement and American army’s movements increased tension
America’s activism amid geopolitical tension has also destabilized the market. The Pentagon’s deployment of thousands of additional troops to the region and news of a lengthy ground operation in Iran have added fuel to the fire. Meanwhile, a recent statement by US President Donald Trump has created a stir, in which he said that America can capture Iran’s main export hub ‘Kharg Island’. If this happens, a retaliatory attack from Tehran could create an oil crisis for the entire world.
Will there really be a supply crisis?
Although oil prices are skyrocketing, some experts believe that this surge is not due to actual supply shortage but due to ‘fear’ (risk premium). According to experts, until the rust does not spread to the major infrastructure of the Gulf or the Hormuz Flow, it should be considered only as market instability. Nevertheless, the $116 level is indicating that many countries including India may see a major change in the prices of petrol and diesel in the coming days.