Dec 26, 2023: Oil prices saw a significant upswing driven by a convergence of factors, notably tensions escalating in the Middle East and growing optimism among investors about the potential for interest rate cuts by the U.S. Federal Reserve. The surge was bolstered by concerns over geopolitical unrest in the region, which typically influences oil markets. Despite these tensions, the announcement from Maersk regarding the resumption of shipping routes through the Red Sea somewhat mitigated worries about oil supply disruptions.
Brent crude futures climbed by $1.19 to hit $80.26 a barrel, marking a 1.5% rise, while U.S. West Texas Intermediate crude also surged by 1.3% to reach $74.50. Analysts observed that despite ongoing tensions, the absence of major oil supply disruptions tempered the support for rising oil prices. Holiday-related thin trading volumes affected market dynamics, while recent incidents such as Houthi attacks on ships impacting global shipping and the persistent Israel-Hamas conflict contributed to last week’s 3% gains in both oil benchmarks.
Shipping companies had temporarily halted routes through the Red Sea, affecting about 12% of global trade via the Suez Canal, but announcements like Germany’s Hapag-Lloyd’s upcoming decision on its Red Sea routes indicate a potential reevaluation of shipping strategies in the region.
