Escalating Middle East Tensions Propel Oil Prices Higher
Yemen's Houthi Rebels Declare Plans to Continue Military Operations Against Israel and Block Israeli Ship Passage in the Red Sea
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Both crude benchmarks continued to rally on Monday, with rising tension in the Middle East after the US and the UK carried out strikes on multiple Houthi targets in Yemen last week.
The international benchmark crude Brent traded at $78.51 per barrel at 11 a.m. local time (0800 GMT), a 0.28% increase from the closing price of $78.29 a barrel in the previous trading session on Friday.
The American benchmark, West Texas Intermediate (WTI), traded at the same time at $72.94 per barrel, up 0.21% from Friday's close of $72.79 per barrel.
Tension surged in the Middle East, the region that hosts the majority of global oil resources, after US and British warplanes carried out airstrikes in the Yemeni cities of Sanaa, Hudaydah and Taiz in response to the Houthis' ongoing attacks on international shipping lanes in the Red Sea.
Expressing his views on the attacks, US President Joe Biden stated that they would not hesitate to take further measures, if necessary, to protect the US people and the free flow of international trade.
The US military said that the Houthis have carried out 27 attacks in the Red Sea since Nov. 19, 2023.
British Foreign Secretary David Cameron defended the action to strike Yemen, commenting that the UK is "prepared to back our words with actions" against the Houthis.
In response, the Iranian-backed Houthis in Yemen said they would continue their military operations against Israel and prevent Israeli ships from passing through the Red Sea, where the world's largest oil trade occurs.
The decision by numerous shipping companies to cease operations has led to the suspension of energy supplies via the Red Sea route and an increase in the anticipation of a global supply chain crisis, both of which are driving up oil prices.
Meanwhile, market players are awaiting important economic data from the US and China, the world's biggest oil consumers. These data releases are expected to reveal more economic activity and oil demand indicators.
China's central bank is scheduled to announce its one-year medium-term lending facility rate later in the day, which determines the main rate at which the central bank lends to big commercial banks.
Experts anticipate a cut in lending rates as the country aims to revive economic activity. Also, on Wednesday, data on China's fourth-quarter gross domestic product will be released.
Investors will also closely follow speeches by several US Federal Reserve officials during the week in the hopes of gaining insight on the timing of the central bank's intended rate-cut decisions for the year.
On Jan. 17, retail sales data from the US, the world's largest oil consumer, is anticipated to provide additional inflationary clues.
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