Red Sea Crisis: Crude oil prices on upward trajectory following US-UK strikes on Houthis

Red Sea Crisis: In the aftermath of joint strikes by the United States and the United Kingdom on Iran-backed Houthi targets in Yemen, crude oil prices experienced a substantial surge of over 2.5%. This surge, marking a 3.1% increase since the year's commencement, has introduced volatility into the energy markets.

Strikes Disrupt Houthi Capabilities and Global Trade

The military actions, aimed at disrupting Houthi capabilities, particularly their attacks on global trade routes, have raised concerns. Brent crude, the global oil benchmark, witnessed a significant impact, and the Red Sea, a vital waterway for global trade and container traffic, has become a focal point for disruptions.

Challenges to Global Trade Logistics

Houthi attacks on international commercial vessels have compelled ships to take longer routes around Africa, presenting logistical challenges for global trade. This disruption has resulted in extended travel times, increased fuel costs, and raised concerns about potential escalation in insurance expenses due to heightened risks in the region.

Economic Ramifications and Global Supply Chains

Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, expressed concerns about potential prolonged chaos affecting companies worldwide. The re-routing of ships from Asia to Europe is causing delays of around 10 days, incurring additional costs of USD 1 million per ship. The tightening of global supply chains raises the risk of bottlenecks, potentially contributing to inflationary pressures.

Houthi Retaliation and Warnings

In response to the strikes, Houthi rebels initiated retaliatory assaults on US and UK warships in the Red Sea. Abdul Salam Jahaf, a senior Houthi member, stated that the Western assault triggered their response. The Houthi deputy foreign minister, Hussein al-Ezzi, labelled the strikes a "blatant act of aggression" and warned of serious consequences for the US and the UK.

International Leaders' Statements

US President Joe Biden asserted that the strikes sent a clear message against Houthi attacks on commercial vessels, emphasizing the protection of freedom of navigation. UK Prime Minister Rishi Sunak confirmed targeted strikes in self-defence, highlighting the UK's commitment to freedom of navigation and free trade flow.

Ongoing Conflict Dynamics

The conflict stems from Houthi attacks on international maritime vessels in the Red Sea, prompting coordinated international responses. As the situation unfolds, the global community watches closely for further developments in this critical geopolitical and economic landscape.