• Sun. May 26th, 2024

Oil prices volatile as Iranian warship enters Red Sea

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A picture taken during an organised tour by Yemen’s Houthi rebels on November 22, 2023 showing the Galaxy Leader cargo ship approaching the port in the Red Sea off Yemen’s province of Hodeida.

– | Afp | Getty Images

Oil prices were volatile on Tuesday after Iran dispatched a warship to the Red Sea, as the situation remains tense in the critical waterway for global shipments that has seen vessels attacked by Yemen’s Houthi rebels.

The West Texas Intermediate contract for February gained 1 cent, or .01%, to trade at $71.66 a barrel on Tuesday. The Brent contract for March gained 14 cents, or .18%, to trade at $77.18.

Crude prices had jumped more than 2% earlier in the trading the session.

Iran on Monday announced it sent the Alborz destroyer through the strategic Bab al-Mandeb Strait, the country’s state media reported, without elaborating on details of the warship’s mission. It added that operations are periodically conducted in the Red Sea to secure shipping routes.

The move comes after the U.S. Navy destroyed three boats of Iran-backed Houthi rebels, killing 10 militants, according to an AP report. The Navy was responding to a distress call by Singapore-flagged vessel Maersk Hangzhou which had come under Houthi fire, the U.S. Central Command said in a statement.

In a statement by a rebel spokesman on Sunday, the Houthi group maintained that the boats were engaged in “official duties to secure maritime routes”, a news channel owned by the rebels stated

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“Any escalation of conflict in this region is certainly going to add more of a risk premium on Brent,” Bernstein’s Senior Energy Analyst Neil Beveridge told CNBC. He noted, however, that there won’t be any major impact just yet.

“We haven’t seen the Iranian naval incursions before. And as long as it really doesn’t lead to any escalation, then I don’t really see any significant impact at this level,” he added.

The Houthi group has been attacking vessels in the Red Sea, targeting Israeli ships and other vessels headed to or from Israel, in retaliation for the country’s war in Gaza that has so far killed nearly 22,000 people there.

Major shipping companies stopped traversing the Suez Canal and Red Sea routes in early December, choosing to reroute via southern Africa instead — a longer and more expensive journey with ocean freight rates hitting as high as $10,000 per container

German container shipper Hapag-Lloyd said Friday it would continue to divert its vessels around the Suez Canal.

However, the launch of Operation Prosperity Guardian, a multinational maritime force, by the U.S, has bolstered the confidence of shipping companies. Danish shipping giant Maersk said Sunday it would resume operations in the Red Sea and the Gulf of Aden.



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