Oil edged higher as traders tracked geopolitical tensions in the Middle East, with the US telling commercial ships to avoid the Red Sea following missile strikes by Houthi militants.
West Texas Intermediate traded just below $73 a barrel, 0.2% higher than last week’s close, with futures not settling on Monday due to a US holiday. Brent crude was above $78. Houthi militants hit a US-owned commercial vessel with an anti-ship ballistic missile on Monday, underscoring warnings from militaries and trade groups that the vital route remains too risky for navigation.
Despite the jump in tensions across a region that supplies a third of the world’s crude, futures face downward pressure from weakness in wider financial markets. European Central Bank officials signaled that it may be too soon to lower rates this year given lingering inflation and geopolitical risks. Traders will be watching for comments from the Davos gathering for more on the outlook.
Crude markets have been transfixed by the situation in the Middle East since the Hamas attack on Israel last October. US and UK forces bombed targets in Yemen over the past several days following months of attacks on commercial ships by the Houthis, who have been targeting vessels to support Hamas.
The costs of war-risk insurance have skyrocketed as a result, and traders remain on edge that Iran may be drawn directly into the conflict. – Bloomberg
