Brent crude prices surged as much as 3% to $116.5 a barrel, nearing its early-war highs of $119 a barrel, while the US crude variant, or West Texas Intermediate, surged above the $96 a barrel mark for the June contract and above $102 a barrel mark for those expiring in May.
The rise in oil prices comes after Iran-backed Houthi militants in Yemen entered the war and more than 3,500 US troops arrived in West Asia over the weekend.
Over the weekend, reports citing sources said that the East-West pipeline of Saudi Arabia, which bypasses the Strait of Hormuz, which has been a key flashpoint during the war, is operating at full capacity of 7 million barrels of oil per day. Most of this is exported through the Saudi port of Yanbu.
Although the Houthis have not said that they will target vessels transiting through the southern Red Sea and the Bab El-Mandeb Strait, they fall within their missile range, as does the Yanbu port.
Brent prices are up over 50% in March and continues to move higher despite mediation efforts by regional countries. Macquarie, in a note on Friday, warned that oil prices could surge to $200 a barrel, if the war drags on till June, and assigned a 40% probability to the same.
The move by the Houthis adds “upside risk mainly via shipping and Red Sea routing,” said Haris Khurshid, chief investment officer at Karobaar Capital LP in Chicago, “But unless it spills into broader Gulf infrastructure or Hormuz flows, it’s more volatility than a true supply shock,” he added.
(With Inputs From Agencies)
