The Houthi threat to shipping in the Red Sea (which we have discussed here, here and here) is having the desired effect.
BP has become the first oil major to pause all shipments through the Red Sea, citing a “deteriorating security situation” because of escalating Yemeni rebel attacks on ships passing through a route that handles about 10 per cent of global trade.
Brent crude, the international benchmark, jumped 2.8 per cent to $78.66 a barrel on the news. The US equivalent, West Texas Intermediate, advanced 2.7 per cent to $73.42 a barrel.
The UK’s benchmark gas price jumped as much as 14 per cent, while its European peer rose close to 13 per cent on concerns about the shipment of liquefied natural gas. The UK oil group’s decision comes as Iran-backed Houthi rebels have intensified their campaign against ships passing through the Suez Canal following the outbreak of the Israel-Hamas war…
Shares in some of the biggest shipping companies also climbed, extending gains from last week as investors expect disruptions will cause freight rates to rise, boosting earnings.
AP Møller-Mærsk, which operates the world’s second-largest container shipping fleet, rose 3.1 per cent, while Hapag-Lloyd, the world’s fifth-largest, jumped 8 per cent. Both companies last week also paused transit through the Red Sea because of the threat of attacks.
Longer routes around Africa could in turn delay the delivery of commodities, consumer goods and oil between Europe and Asia…
The price of oil could jump “at least” $10-$15 for Brent crude if all shipments from the Middle East to Europe avoided the Red Sea and travelled around Africa, said Henning Gloystein, a director at consultancy Eurasia Group. Prices for TTF, Europe’s main gas trading benchmark, could rise 25-30 per cent, he added.
Ship owners have called for protection on maritime routes. The US, which suffered attacks on a warship this month, is preparing to announce an expanded international task force to protect vessels in the Red Sea.
Well, good.
As to why the Iran-backed Houthi might be doing this, perhaps it is just a gesture of support for Iran-backed Hamas, but, (and this is only speculation) I cannot help thinking that a surge in the price of oil and gas as the Northern Hemisphere moves into winter will be well-received by Iran’s pals in the Kremlin, which is, of course, hoping that rising energy prices will discourage European support for Ukraine, and boost its own coffers too.
And, of course, Tehran, too, does well out of a higher oil price . . .