The global oil market has seen a sharp rise of more than four percent in crude oil prices due to the retaliatory actions by the US and Britain against the Houthi militia in Yemen in the Red Sea. The oil reserves are the lifeline of the global market in the beginning of the corporate earning season.
In the past month, the Iranian-backed Houthi militia has intensified its attacks on cargo ships in the Red Sea. The attacks, carried out with rockets and missiles, have severely affected the commercial shipping in the region. Israeli and Indian ships have also been targeted.
In view of the deteriorating situation in the region, several oil companies have changed their route for their oil-carrying ships. British Petroleum has also been transporting oil from African ports.
Jarn Shieldrap, the chief economist of SEB Bank, says that the oil impact of the attacks and retaliatory actions in the Red Sea is a natural consequence for the global oil market. The situation is uncertain. The US has also formed a coalition with like-minded countries to launch operations against the Houthis.
The disruption of commercial shipping in the Red Sea poses a serious threat to the oil supply in the world. The oil transportation is already facing difficulties. If the situation worsens, it will create more problems for the developed world, as they need large-scale energy to maintain their industrial infrastructure.
Jarn Shieldrap, the chief economist of SEB Bank, says that if the US and Britain’s retaliatory actions against the Houthi militia fail, more oil companies will opt for alternative routes. This will result in about 80 million barrels of oil being stuck in alternative sea routes. This could lead to an increase of 5 to 10 dollars per barrel in the oil price. The global oil market is sensitive to the quality of oil. The affairs are heading towards a big disaster.