Oil prices have hit US$ 80 a barrel as fears grew about the economic impact of disruption to international trade through the Red Sea and escalating tensions in the Middle East.
Raising concerns about a possible inflation shock for the world economy, Brent crude prices jumped by about 4 percent to a high of US$ 80.75 a barrel on Saturday, while US West Texas Intermediate crude also increased after US and UK airstrikes against Houthi rebel sites in Yemen.
The overnight strikes were in response to attacks on shipping in the Red Sea and the missiles, drones and rockets fired by the Yemeni group at US and UK warships, as tensions mount in the region during the Israel-Gaza War.
The world’s largest shipping lines have paused shipments through the Red Sea, diverting container freight around the Cape of Good Hope on the southern tip of Africa – adding thousands of miles to journeys, driving up costs and delaying deliveries of vital components and consumer goods to Europe.
Economists warn that disruption to shipping and higher oil prices, if sustained, could undermine progress to continue bringing inflation back down from the highest levels in decades after the Covid pandemic and energy price-shock exacerbated by Russia’s invasion of Ukraine in February 2022.
The rerouting of shipments from the Red Sea to around the coast of Africa adds about 10 days longer to journey times, adding to the cost of deliveries and causing delays for manufacturers and retailers.
– The Guardian
