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Shipping company Maersk (MAERSK-A.CO, MAERSK-B.CO) has suspended shipping in Red Sea until further notice due to a recent attack from Houthi rebels. As a result, oil prices (CL=F, BZ=F) spiked more than 2% Tuesday morning, but fell back down as the morning continued. Yahoo Finance Reporter Ines Ferré joins the Live show to break down the latest development with ongoing conflicts and its impact on oil prices.
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Video Transcript
- Well Maersk, is halting Red Sea shipping until further notice. This comes after Houthi rebels attempted to attack the shipping company's vessel over the weekend. As supply and disruption fears continued to grow, what's next for oil prices? To break it down for us, Yahoo Finance reporter Ines Ferré here with the latest. Hey, Ines.
INES FERRE: Hey, Rachelle. Yeah, and we saw oil prices spike more than 2.5% earlier this morning for both WTI and Brent Crude. And they have since pared back those gains. But let's take a look at some of the action that we saw throughout the session today. Here's an intraday. And you're looking at WTI that's down more than 1% right now. Brent Crude is down about 1%.
So you had this spike earlier this morning, more than 2%, as I mentioned. This was after Iran deployed a warship to the Red Sea. This came after the US Navy destroyed three Houthi ships on Sunday, after the US said that it had received a distress call from a Maersk shipping vessel, an apparent hijacking that was apparently taking place, so Maersk suspended its shipments for 48 hours, as you had mentioned.
And you'll recall that earlier in December, you had several shipping giants which had been suspending their shipments throughout the Red Sea, which connects to the Suez Canal. And it is a short area, it's an area through which shipments many shipments go through oil and other types of shipments where you get goods from Europe to Asia.
So you have increasing costs now and travel times, if these ships are to be diverted. And you had one analyst that was saying that the escalation of tensions between the US and Iran has caught some fund managers by surprise and they're bringing on some long positions. We are seeing the US dollar indexes going higher, so that is putting some pressure on oil prices. And we also saw oil prices come down throughout the session today, after you had that PMI data print that came out that's showing further contraction for the month of December.
So you've got really some demand concerns that are overshadowing these rising tensions in the Red Sea. Last year was a volatile year for oil, oil down 10% last year, both for WTI and Brent Crude. This year analysts are expecting another volatile year. Rachelle