LONDON: The oil price surged on Friday, as the escalating conflict in the Red Sea region threatened to further disrupt global trade, while stocks rose in light of US inflation data that reinforced investors’ view that interest rates could soon fall.
Oil rose by 4% after the United States and Britain said they had launched strikes from the air and sea against Houthi military targets in Yemen in response to the group’s attacks on ships in the Red Sea, a dramatic regional widening of the Israel-Hamas war in Gaza.
Brent futures were last up 4% at $80.52 a barrel, while US West Texas Intermediate (WTI) crude rose 4.1% to $74.99.
“Oil prices have climbed sharply following the attacks, with Brent Crude now around 7% higher since early December, before Houthi rebels began targeting ships in the Red Sea,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, said.
“Reports coinciding with the UK/US military action suggest the British government is modelling scenarios which could see prices rise by $10 a barrel, if the Red Sea crisis continues, with gas prices at risk of going up by 25%,” she added.
Meanwhile, global stocks rallied, underpinned by the prospect of a drop in interest rates. The MSCI All-World share index (.MIWD00000PUS) was up 0.2%, reflecting a bounce in Europe, where the STOXX 600 (.STOXX) rose 0.7%, led partly by a rally in shares of aerospace and defence companies, where the sector index hit a record high. (.SXPARO)
U.S. stock futures fell 0.2%, while government bond yields edged lower, reflecting demand among investors for safe-haven assets.
The dollar rose against a basket of major currencies, as did gold , which benefited from investor risk aversion, rising 0.9% to $2,046 an ounce. Other classic safe-havens such as the Swiss franc held mostly steady, a situation that some analysts said could change.
“If we see a massive escalation of the situation … then the traditional flight-to-safety will see U.S. Treasuries, safe-haven currencies like yen and Swiss franc benefit.” said Khoon Goh, head of Asia research at ANZ in Singapore.
