Oil Prices Spike Amid Geopolitical Tensions Following US, UK Hits on Houthi Targets

Oil prices soared on Friday, amplified by the growing tensions in the Red Sea area which cast shadows over the stability of global trade routes. Simultaneously, stock markets edged higher following the release of U.S. inflation data, which appeared to fuel expectations of a potential decline in interest rates.

The cost of oil advanced by 4% in the wake of announcements from the United States and the United Kingdom about their joint military strikes targeting the Houthi rebels in Yemen. This offensive was in retaliation to the Houthis’ strikes on commercial shipping in the Red Sea, marking a significant broadening of the conflict that also encompasses the Gaza-based Israel-Hamas hostilities.

The latest figures showed Brent crude futures increasing by 4%, priced at $80.52 per barrel, while the U.S. West Texas Intermediate (WTI) crude experienced a growth of 4.1%, coming in at $74.99 per barrel.

Susannah Streeter, the leader of money and markets at Hargreaves Lansdown, pointed out, “Following these assaults, oil prices have experienced a sharp ascent, with Brent Crude now approximately 7% more expensive since the beginning of December, prior to the Houthi aggression towards ships in the Red Sea.” She also revealed, “Contemporaneous with the military response by the UK and the US, there are indications that the British authorities are contemplating situations that might see oil prices increasing by as much as $10 a barrel if the turbulence in the Red Sea doesn’t subside, which could also send gas prices soaring by around 25%.”

In the realm of global equities, there was a notable uptick, driven by the possibilities of an interest rate cut. The MSCI All-World share index experienced a slight gain of 0.2%, mirroring the upward momentum in European markets, where the STOXX 600 index climbed by 0.7%. This upswing was partially propelled by a surge in the value of aerospace and defense company stocks, catapulting the sector index to a historic peak.

In the U.S. market, futures contracts for stocks slipped by 0.2%, while the yields on government bonds trimmed down, signaling a growing investor appetite for assets considered to be safer.