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Friday, May 24, 2024

US-UK Strikes in Yemen Escalate Oil Prices and Global Trade Concerns

Attacks on Yemen cause a 4% surge in oil prices, triggering global trade disruptions and economic concerns.

Oil prices experienced a 4% surge as the US and UK initiated strikes in Yemen, responding to recent attacks by Houthi rebels on ships in the Red Sea. Brent crude reached $80 per barrel for the first time this year, with the rebels threatening retaliation against Western military action. This increase, however, remains below the highs seen during Russia’s invasion of Ukraine.

Amidst the rising prices, the UK government has expressed concerns about potential economic disruptions. The Treasury has modeled scenarios predicting outcomes such as a more than $10 increase in crude oil prices and a 25% rise in natural gas. Ongoing attacks on Red Sea shipping pose a threat to the fragile UK economy, risking higher inflation and increased costs for shipping containers.

Global Trade Disruption and Companies’ Responses

Houthi rebels intensified attacks on commercial vessels in the Red Sea, leading to a shift in shipping routes and disruptions in global trade. Major shipping companies, including Maersk, have opted for longer routes around Africa, adding significant travel time and costs. About a quarter of the world’s shipping containers are being diverted, impacting various industries, including automotive, technology, retail, and food.

The attacks by Houthi rebels are being carried out in protest against U.S. support for Israel’s actions against Gazan civilians. Gaza has been under attack by Israeli settlers since October 7, when Hamas launched an assault on Israel in response to its long-standing brutality, oppression of the Palestinian people, and occupation of their land.

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The US and UK strikes aim to curb Houthi attacks and finish all support for Palestinian cause. The situation has already led to significant disruptions in global trade, affecting oil prices, shipping routes, and various industries.

The escalation in the Middle East has triggered fluctuations in oil prices, impacting global markets. While fears of wider conflict persist, the economic fallout and potential supply chain disruptions remain key concerns for nations and businesses worldwide.