Red sea shipping chaos sparks 3% surge in oil prices

Global oil prices experienced a three percent surge on Monday as major shipping companies suspended operations through the Red Sea following attacks by Yemen’s Iran-backed Huthi rebels.

The rebels claimed responsibility for targeting two “Israeli-linked” vessels, intensifying the ongoing strife in the region.

The impact of these attacks reverberated across the international shipping industry, with five of the world’s six largest shipping companies opting to avoid the Red Sea route.

British oil giant BP and Taiwan’s Evergreen joined the growing list of companies suspending transit through the crucial waterway, causing disruptions to the Suez Canal, a vital passage for cargo and oil.

Market analyst Michael Hewson at CMC Markets highlighted the significance of the Red Sea and Suez Canal, stating, “These suspensions mean that cargos face a lengthy diversion around the Horn of Africa, adding significant costs to company supply chains and having inflationary impacts.”

As oil prices soared, attention turned to US stocks seeking to extend last week’s rally.

Investors anticipated a potential cut in interest rates by the US Federal Reserve in the coming year. However, the optimism appeared to wane in Asia and Europe after the initial boost.

Simultaneously, Yemen’s Huthi rebels continued their drone and missile strikes on vessels entering the Red Sea, emphasizing their intent to pressure Israel over the conflict with Hamas in the Gaza Strip.

Despite the geopolitical tensions, global equity indices were poised to end the year on a high note.

The Dow and Nasdaq hit record highs on Wall Street last week, driven by surges in tech firms. However, analysts noted a slowdown in the buying frenzy on Friday, attributing it to expected corrections after substantial gains.

Neil Wilson, chief market analyst at Finalto, expressed confidence, stating, “We’re into the final furlong, and unless there’s a big surprise, we’re looking at some very healthy gains for the most part in 2023.”

Amidst the economic landscape, the Bank of Japan’s upcoming meeting added to the market’s watchlist.

Speculation arose regarding a potential shift in the bank’s policy, although analysts did not anticipate an immediate departure from its ultra-loose stance.

Key figures around 1630 GMT:

West Texas Intermediate: UP 3.0 percent at $73.58 per barrel
Brent North Sea crude: UP 3.0 percent at $78.86 per barrel
New York – Dow: UP 0.2 percent at 37,385.15 points
London – FTSE 100: UP 0.5 percent at 7,614.48 (close)
Paris – CAC 40: DOWN 0.4 percent at 7,568.86 (close)
Frankfurt – DAX: DOWN 0.6 percent at 16,650.55 (close)
EURO STOXX 50: DOWN 0.6 percent at 4,521.13 (close)
Tokyo – Nikkei 225: DOWN 0.6 percent at 32,758.98 (close)
Hong Kong – Hang Seng Index: DOWN 1.0 percent at 16,629.23 (close)
Shanghai – Composite: DOWN 0.4 percent at 2,930.80 (close)
Dollar/yen: UP at 143.01 yen from 142.22 yen on Friday
Euro/dollar: UP at $1.0924 from $1.0897
Pound/dollar: DOWN at $1.2652 from $1.2677
Euro/pound: UP at 86.33 pence from 85.94 pence