Oil Reaches $80 a Barrel Following Houthi Attacks Against Tankers in the Red Sea
Jose Nino
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On January 12, 2024, oil prices briefly surged north of $80 a barrel for the first time in 2024 after the United States and the United Kingdom hit targets in Yemen.
These attacks came in response to the 25 Houthi militant attacks launched against commercial vessels since November.
British Prime Minister Rishi Sunak declared that strikes were “necessary and proportionate” as the Houthi attacks had greatly disrupted commercial shipping, targeted US and UK warships, and created commodity price shocks.
Energy traders believe that higher prices could be in store as the conflict originating from the Israel-Hamas appears to be on the cusp of transforming into a regional war and cause greater supply chain shocks.
The International Association of Independent Tanker Owners (Intertanko), which makes up nearly 70% of all internationally traded chemical, gas, and oil tankers, issued a warning to its members on January 12 to “stay well away” from the Bab al-Mandab strait – a first time warning.
Several prominent tanker operators confirmed that they would avoid the Middle East due to ongoing tensions in the Red Sea. Such a move would add substantial costs and time to shipments from the Middle East to Europe as vessels re-route around Africa.
Bob McNally, founder of Rapidan Energy and a former adviser to the administration of George W. Bush, has calculated that oil prices could surge by about 15% if the conflict looks to metastasize into a regional war. “A possible escalation between Israel and Iran’s main proxy Hezbollah in Lebanon is a still under-appreciated Iran contagion risk,” McNally observed.
Foreign policy interventionism has its hidden costs. Thanks to the US’s constant involvement in the Middle East, it’s now facing blowback in the form of constant attacks against its commercial shipping. This will result in unnecessary casualties and major economic upheavals.
If the US wants to restore sanity on the global stage, it should drastically scale back its military footprint abroad.
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