The escalating situation in the Red Sea has raised concerns among traders about potential disruptions to crude oil supply in the Middle East. U.S. and British troops have launched air strikes against the Houthis, prompting the group to threaten a “strong and effective response.” As a result, several tankers have changed course to avoid the Red Sea, and Qatar Energy has suspended shipping in the area to seek safety advice.
Despite these developments, oil production has not yet been affected, with owners of tankers finding alternative routes to ensure the safe transport of cargo. However, there is growing concern about the potential for a significant escalation of the situation in the future, which could have a considerable impact on oil supply.
According to Warren Patterson, head of commodity research at ING, while there has not been a direct impact on oil supply, the possibility of a significant escalation in the Red Sea poses a risk to the market. Additionally, there is the potential for a disruption to oil shipments in the Strait of Hormuz, which could lead to a sharp increase in oil prices.
Goldman Sachs analysts noted that while conflicts in the Middle East are not currently impacting oil production, the geopolitical risk premium reflected in oil prices seems relatively modest based on options implied volatility.
From a technical standpoint, crude oil prices are showing positive signals, with Brent crude awaiting a test at $81.00. If the price falls below $77.44, it would indicate a weakening market, with potential for further declines.
Overall, the situation in the Red Sea has prompted uncertainty in the oil market, with traders closely monitoring developments for potential impacts on supply and crude oil prices.