Global oil prices surge by 1% following escalations in West Asia

By Al Mayadeen English
Source: Agencies
29 Jan 2024 13:48
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Market analysts note that President Biden's commitment to respond to the drone attack could further intensify the market's stakes in the region.

Oil tanker Marlin Luanda on fire after an attack, in the Gulf of Aden, Jan. 27, 2024 (AP)

Global oil prices experienced a surge on Monday following the spiking escalation of tensions in West Asia, most significantly in the Red Sea, which serves as a primary route for oil transportation.

The instability and consequent irregularity of oil transport follow US-UK warmongering against Yemen and consequent aggression.

Three days ago, the Yemeni Armed Forces targeted a British oil tanker in the Red Sea, which came as a retaliation to the joint British-American aggression against Yemen on January 12.

With the onset of the genocidal aggression against Gaza, the Yemeni Armed Forces enforced a blockade on Israeli navigation in the Arabian and Red seas. The YAF recurrently reaffirmed their commitment to international navigation while exclusively preventing Israeli and "Israel"-bound ships from sailing through the Red Sea in an effort to build pressure on "Israel" to stop the genocide against the people of Gaza.

Allowing for an easier and less costly genocide, the US and UK militarized the Red Sea and consequently launched attacks against Yemen. Following the aggression, Yemen expanded its bank of targets to include US and UK vessels, in addition to Israeli and "Israel"-bound vessels.

In response to these developments, oil prices surged, increasing by over one percent (in relation to the two popularly used benchmarks of global oil prices: Brent and WTI).

Market analysts, including Andrew Ticehurst at the Japanese financial company Nomura, noted that President Biden's commitment to respond to the drone attack could further intensify the market's stakes in the region.

"The news of three US troops being killed by a drone attack, and President Biden saying 'we shall respond', will likely dial up the market’s focus on the region," he said.

The escalations in the region are driven by "Israel's" ongoing aggression against Gaza, contributing to investor worries about a potential broader conflagration involving Iran and the United States.

Middle East situation could push oil to $157 a barrel: World Bank

Back in October, the World Bank warned that an escalation of the current war in Gaza may boost global oil prices as high as $157 per barrel in extensive interruption.

In its Commodity Markets Outlook, the World Bank warned that "in a 'large disruption' scenario—comparable to the Arab oil embargo in 1973— the global oil supply would shrink by 6 million to 8 million barrels per day. That would drive prices up by 56% to 75% initially—to between $140 and $157 a barrel."

Global oil prices could rise to between $93 and $102 per barrel in a "small disruption" scenario and between $109 and $121 in a "medium disruption" scenario.

Despite the fact that the world economy is currently doing better than it did in the 1970s, the World Bank issued a warning that the conflicts in the Middle East and Ukraine may force the world's commodity markets into uncharted territory.

Additionally, the World Bank stated that rising oil costs would have a detrimental impact on food prices.

The world witnessed oil prices skyrocket following the launch of Operation Al-Aqsa Flood, with benchmark oil contracts of Brent and WTI soaring over 5% in Asian deals before gradually easing back.

Global equity markets have been experiencing a shake ever since the launch, even though energy firms were given a push by higher oil prices, which in turn gave them higher profits.

Currencies like the dollar, yen, and Swiss franc, in addition to gold, have seen support while benefiting from their status as a haven investment during severe geopolitical turmoil.

The current events in the region have triggered fear with regard to inflation and spiked prices with central banks trying to soothe interest rate hikes to avoid recessions.