Oil prices posted solid gains in recent days due to developments in the Red Sea.
Geopolitical events have had a significant impact on energy markets in the first half of this decade. There was, of course, the Russian invasion of Ukraine that took place in February 2022. Oil prices surged in the aftermath as nations in the developed world raced to impose sanctions on the Russian state.
Back in October of this year, Hamas shocked world opinion when it launched a surprise attack in southern Israel. Over 1,000 Israeli citizens were killed in the attack, and several hundred were kidnapped by militants. In response, Israel has launched a devastating offensive into the Gaza strip with the express purpose of destroying Hamas. Experts and political analysts have warned that Iran and its proxies could enter the conflict and risk a far more destructive and wider war.
Houthi Yemeni attacks on shipping in the Red Sea have threatened global trade through the month of December. If the attacks persist, this could result in major disruptions to global supply chains. Oil prices and other goods have experienced a strong spike in the aftermath. Indeed, BP plc and others have stopped shipments through the Red Sea during this crisis.
Investors will want to watch the developments in the Red Sea closely going forward. Yemen is another flashpoint in the Middle East power struggle between Saudi Arabia and Iran.
