Growing Middle East tensions are causing a spike in global oil prices

WEB DESK: Tuesday saw a roughly 1% increase in oil prices as investors kept a tight eye on the potential effects of growing Middle East tensions.

At 1333 GMT, Brent crude futures experienced a gain of 81 cents, or 1.04 percent, to hit $78.96 per barrel. This came after a slight 14-cent decline on Monday.

Positive trends were also seen in US West Texas Intermediate crude, which increased by 41 cents, or 0.56 percent, to $73.09 per barrel on Friday. Notably, Monday’s official holiday kept US markets closed.

On Tuesday, traders were paying close attention to the rising volatility in oil futures due to the escalating violence in the Middle East.

“The brief spikes we’ve seen have highlighted the sensitivity in the market to events around the Red Sea,” said Craig Erlam of OANDA.

The Houthi movement in Yemen declared on Monday that it would continue to attack US ships as well as other targets in the Red Sea region. This announcement came after US-led strikes in Yemen.

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An increasing number of oil tankers are avoiding the southern Red Sea after a missile struck a bulk carrier flying the flag of Malta off the coast of Yemen on Tuesday. The largest shipper in Japan, NYK, told Reuters that it had ordered all vessels to avoid using the Red Sea.

Following the strikes last week, Shell, a well-known oil giant, announced an indefinite halt to all exports via the Red Sea, according to the Wall Street Journal.

Concurrently, hostilities intensified in other areas of the vicinity as Iran declared on Tuesday that it would launch ballistic missiles towards targets in Syria and Iraq. The action was justified as a counterterrorism strategy and a defense of Iranian sovereignty.

Analysts emphasized that unless there is a noticeable impact on output, the geopolitical risk premium on oil prices may be restricted.

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In the event that there is no discernible and real impact on oil production, PVM analyst Tamas Varga predicted that prices will stay well within the current $72-$82 range.

A scheduled speech by US Federal Reserve Chairman Christopher Waller at 1600 GMT on Tuesday attracted investor attention as well, as speculation about possible interest rate adjustments by the Fed grew.

Although there are still predictions that the European Central Bank will lower interest rates, officials have not yet made firm announcements regarding when these reductions will occur.