US-led airstrikes on Houthi targets in Yemen rattled energy markets on Friday, sending oil prices sharply higher.
US crude climbed 4.2% to $75 a barrel in recent trading. Brent crude, the world benchmark, jumped 4% and crossed over the $80-a-barrel level.
This comes after US-led strikes on multiple Houthi targets in Yemen in response to repeated attacks on commercial shipping in the Red Sea. The strikes on Iran-backed Houthis raise the specter of a regional conflict that could derail oil supplies from the Middle East.
“The chance of dragging multiple oil producing countries into the conflict is definitely higher today than it was yesterday. And it was higher yesterday than the day before,” said Robert Yawger, vice president of energy futures at Mizuho Securities.
Another concern is that oil facilities in Saudi Arabia could get hit by a retaliatory strike from the Houthis. In 2019, roughly 5% of world oil supply was briefly knocked offline in a large-scale drone attack on Saudi oil facilities.
“Once you start hitting facilities on land in Yemen, that is taking things to the next level,” Yawger said.
Despite Friday’s gains, oil prices remain lower than where they were before the October 7 attacks by Hamas against Israel due to concerns about oversupply.
Prices initially climbed sharply on Thursday after Iran seized an oil tanker in the Gulf of Oman. However, those gains later faded as attention refocused on the fundamentals.
“There is a battle underway from day to day at the moment between fundamentals and geopolitics,” Matt Smith, lead oil analyst at Kpler, said in an email. “The fundamental backdrop is seasonally weak…but on the flipside we have ongoing concerns and incidents in the Red Sea, and now close to the Strait of Hormuz, two of the biggest maritime chokepoints in the world.”
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