US, UK aggression on Yemen increases oil prices, risks of inflation

By Al Mayadeen English
Source: News websites
12 Jan 2024 13:43
2 Shares

The attack, backed by Australia, Canada, the Netherlands, and Bahrain, has raised crude prices by more than 2% on Friday.

A pumpjack extracts crude at an oil field in Emlichheim, Germany, March 18, 2022. (AP)

Oil prices saw an influx following the US and UK's attacks on Yemen, instigating worries about the escalation of the conflict in the oil-rich region.

The attack, backed by Australia, Canada, the Netherlands, and Bahrain, raised crude prices by more than 2% on Friday, with reports estimating that prices have surpassed $75 and could reach $80.

This was Operation Prosperity Guardian's attempt at countering the inflation of prices as Yemen targets ships, thus imposing additional costs on ships passing through the Red Sea canals as they reroute to avoid the area. However, in sweet irony, the West's support for genocide and aggression in the Middle East backfires and threatens its economic revival.

📈 Oil prices rise following the US attack on Yemen

According to the latest data, after the American and British attacks on Yemen, the price of a barrel of Brent oil in the North Sea rose by $1.63, equivalent to 2.11%, so the price is now $79.4.

The price of WTI Crude Oil rose… pic.twitter.com/rcXRKdVNIS
— War Watch (@WarWatchs) January 12, 2024

West fires rockets at a crumbling economy

Investors showed significant distress following the move, although stock prices had already been unstable due to an unexpected rise in US inflation, which further shrunk hopes of an early interest rate cut by the Federal Reserve.

This furthers the economy's stability and rocks the "soft landing" scenario the US had been confident about. "If oil were to substantially increase... that would jeopardize... this soft landing scenario that is quite likely for the year," Morgan Stanley Investment Management's Andrew Slimmon told Bloomberg Television.

The US consumer price index also surpassed forecasts, which also affects the possibility of an interest rate cut. Stocks concluded 2023 with a robust surge, fueled by the anticipation that the central bank would promptly implement rate cuts due to declining inflation and signals from policymakers affirming such intentions for the current year.

However, minutes from the December meeting of the Federal Reserve revealed officials' inclination to maintain elevated borrowing costs for an extended duration to carefully manage price stability. This was followed by unexpectedly strong employment data indicating the labor market's resilience.

Although Thursday's widely monitored CPI reading did not definitively rule out a rate reduction in March, analysts noted that it added complexity to the argument supporting such a move.

Global repercussions

The three primary indices on Wall Street, the Dow Jones Industrial Average (DJIA), S&P 500 Index, and Nasdaq Composite Index, concluded the day with minimal change, while Asia encountered challenges.

Hong Kong and Shanghai experienced declines following data revealing a seven-year low in Chinese exports and the third consecutive month of falling inflation, marking the longest such period since 2009. These statistics underscored the challenging condition of the world's second-largest economy as leaders grapple with finding solutions to stimulate growth.

Sydney, Seoul, Singapore, and Taipei also recorded declines, while Wellington, Manila, Mumbai, Bangkok, and Jakarta saw gains. Tokyo witnessed an increase of over one percent, extending a rally that pushed it beyond 35,000 on Thursday for the first time since 1990. The Nikkei's surge has been driven by a weaker yen, benefiting exporters, and optimism about the Japanese economy's outlook.

Risks of escalation

As Yemen remains steadfast in its support for Palestine amid the Israeli genocide in Gaza, by shaking the global supply chain and striking vessels affiliated with the occupation, the US and UK made the wrong call of attacking Yemen and risking a national economic collapse.

The Western nations claim that the attacks were in response to Yemeni Navy operations conducted this week.

The Navy, the Missile Force, and the Drone Air Force in the Yemeni Armed Forces "executed a joint military operation involving a large number of ballistic and naval missiles and drones, targeting an American ship that was providing support to the Zionist entity," according to the spokesperson for the Yemeni Armed Forces.

Commenting on the exchange and warning against the triggering of large-scale operations, SPI Asset Management's Stephen Innes said, "While this event may not constitute the 'big one' -- a direct threat to Iranian leaders or assets -- circumstances could evolve if the current escalation jeopardizes Iran's credibility or an increasingly confident Israel expands its targets."

Yemen not deterred

Despite the US-UK aggression early today, Ansar Allah, the vanguard of the Yemeni Resistance, declared its unwavering commitment to targeting Israeli and "Israel"-bound ships in the Red Sea. The spokesperson for the movement, Mohammed Abdul Salam, condemned the military aggression against the Yemeni mainland.

"We affirm that there is absolutely no justification for this aggression against Yemen, as there was no threat to international navigation in the Red and Arabian seas, and the targeting was and will continue to affect Israeli ships or those heading to the ports of occupied Palestine," Abdul Salam stated in a post on X.

نواصل الجهود عبر المفاوضات لإنهاء العدوان ورفع الحصار ،وأملنا في الله أن يتحقق ذلك وأن يُجبَر الضرر، وإن شاء الله تكلل الجهود باتفاق سلام يلبي مطالب شعبنا اليمني العزيز من صعدة إلى المهرة.
— محمد عبدالسلام (@abdusalamsalah) April 7, 2023

The New York Times cited US officials as saying that "there was a fear that strikes on Yemen could escalate into a tit-for-tat between American naval vessels" and the Yemeni forces. The newspaper also revealed that some US allies in the Middle East, including Qatar and Oman, had raised concerns that strikes "could spiral out of control and drag the region into a wider war."

Hussein al-Azzi, the Deputy Foreign Minister in the Sanaa government, warned that the United States and Britain must be "prepared to pay a high price and bear the severe consequences for their blatant aggression."

On his part, Mohammad al-Bukhaiti, a member of the Ansar Allah political bureau, emphasized that the US and the UK "will soon realize that the direct aggression on Yemen was the biggest folly in their history."