YEREVAN (CoinChapter.com) — Oil Prices are surging following the military strikes conducted by the United States and the UK against Iran-backed Yemeni militant group Houthis. According to market reports, particularly from CNBC, the Global benchmark Brent jumped around 4% from yesterday’s price to reach $80.55 a barrel. Meanwhile, the West Texas Intermediate (WTI), the benchmark in the US, also climbed over 4% to reach an intra-day high of $75.25 per barrel.
What is the Houthi group, and why are they making news?
The Houthis are a rebel Shia military group in Yemen that wants to storm to power in the country through military means. Although officially called Ansar Allah or “Supporters of God”, they became more popular as “Houtis” because their leadership stems from the Houthi tribe of Northern Yemen.
Primarily backed by the Islamic Republic of Iran, the group has become a big problem for global businesses. Fueled by its anti-American and anti-Israel agenda, the Houthis have become one of the strongest supporters of Israel.
In their efforts to show their support for Gaza, the group has increased its attacks on ships carrying cargo through the Red Sea. The Gaza Strip is currently caught in the ongoing Israel-Palestine conflict that started after Hamas launched an attack in early October.
While the attack is mainly aimed at Israeli vessels, or those bound for or from the country, other ships have also been targets of their activities.
“These targeted strikes are a clear message that the United States and our partners will not tolerate attacks on our personnel or allow hostile actors to imperil freedom of navigation in one of the world’s most critical commercial routes,”
US President Joe Biden said in a statement following the attacks against Houthi controlled areas in Yemen.
The Houthis are also anti-Saudi Arabia, which backs the ruling dispensation. The scenario has led many experts to call the conflict an Iran-Saudi proxy war.
What happens to oil prices if the problem continues?
With Shipments via the Red Sea already down over 35%, the US and the UK have taken active steps to counter this growing problem. Although the recent attacks come as a huge blow to the Houthis, they are unlikely to stop the group from targetting vessels.
The Houthis have already pledged retaliation, indicating that the problem will persist. Moreover, the group also warned Saudi and Qatar of a new war if they opened their air space for US and UK attacks.
The Red Sea currently accounts for around 10% of world trade.
A complete blackout of the route could be detrimental to Europe and the West. Experts fear the conflict will increase oil prices in the coming weeks.
“We look for higher prices over the coming months, expecting Brent to move above $80 a barrel, as result of OPEC+ production cuts keeping the oil market slightly undersupplied,”
Giovanni Staunovo, a commodity strategist at UBS Group AG said.
Meanwhile, Iran and Russia have denounced the attacks against the Houthis. According to them, the development threatens regional peace and could cause a major war. Hezbollah, the Lebanese Shia Islamist political party also backed by Iran, has indicated its intentions to back the Houthis with boots on the ground.
With tension still high in the region, its impact on the global economy won’t be insignificant.
