Crude Vulnerable To Escalating Middle East Tensions

Oil prices closed around 1% higher on Friday but well off their intraday highs which were driven by escalating tensions in the Middle East. The US and UK attacks on Houthi rebels in response to their attacks on shipping in the Red Sea drove WTI above $75/bbl and Brent above $78. The Iran-backed Houthis have vowed to retaliate. The USD index finished up 0.1%.

• Brent rose 1.2% to finish at $78.32/bbl. It rose to $80.75 during the European session but then trended lower the rest of the day. But the benchmark ended the week down 0.6%.
• WTI closed 1% higher at $72.76/bbl. It reached a high of $75.25 earlier but was unable to hold these gains and ended the week down 1.4%.
• The US Naval Forces Central Command has told US-flagged ships to restrict use of the Red Sea following the attack on Houthi positions. At least three tanker firms are going to suspend use of the southern Red Sea. The Suez Canal is a major waterway for oil and gas shipments.
• Oil prices remain vulnerable to a further escalation of tensions in the Red Sea, especially if it looks like the conflict will become region wide. President Biden said he was concerned about its impact on oil prices.