Crude oil prices hit the highest in two weeks following BP’s announcement it will temporarily reroute its tankers away from the Red Sea amid intensifying attacks by the Yemeni Houthis on vessels in the area.
Brent crude gained 1.8% on Monday and earlier today topped $78 per barrel, while West Texas Intermediate topped $72 per barrel.
Despite price stabilization today, the potential risks caused by supply disruptions and the Middle East unrest could bring significant volatility to oil markets,” CMC Markets analyst Tina Teng told Reuters.
BP announced it would halt shipments of oil and gas via the Red Sea on Monday, saying “In light of the deteriorating security situation for shipping in the Red Sea, BP has decided to temporarily pause all transits through the Red Sea,” and adding that “We will keep this precautionary pause under ongoing review, subject to circumstances as they evolve in the region.”
The move prompted an immediate response from the United States, which announced it was forming a coalition to step up patrols in the area, engaging the support of half a dozen NATO members including the UK and France, and Gulf ally Bahrain.
The Red Sea is a key route in global oil shipments leading to the Suez Canal that handles some 8% of global oil trade, Bloomberg noted in a report. It is the shortest trade route between Asia and Europe.
The report cited an energy analyst as saying the main thing to watch for now was whether the attacks would escalate further. “The broader concerns are if Houthi bombings and the blockade will escalate tensions in the Mideast and whether Iran jumps into the fray,” John Driscoll, JTD Energy Services founder and director, said.
Iran has warned an increased presence of Western Navies in the region would be a mistake, per a Reuters report from earlier today.