Oil prices experienced volatility early on Monday following an attack on a military base in Jordan that resulted in the deaths of three U.S. servicemen. This incident marks the first time that U.S. troops have been killed during the current Middle East conflict. The U.S. attributed the drone strike to an Iran-backed militia and pledged to retaliate.
Since the outbreak of hostilities on October 7, when Hamas initiated attacks on Israel, the concern for investors has been the potential widening of the conflict and its impact on oil supplies in the region. The Middle East is home to some of the world’s largest oil producers.
Iran has denied any involvement in the attack on Jordan.
In a separate matter, Houthi rebels based in Yemen continue their attacks on shipping vessels in the Red Sea. In response, the U.S. and its allies have targeted these militants to ensure global trade security.
According to Goldman Sachs strategists, the Red Sea’s Bab El Mandeb Strait has witnessed a daily decrease of approximately 1.2 million barrels of oil since the start of the shipping attacks in December.
This route is not only crucial for oil transportation but also for other goods. Steve Lamar, CEO of the American Apparel & Footwear Association, reveals that roughly 20% of clothes and shoes imported into the U.S. pass through the Suez Canal. Similarly, in Europe, around 40% of clothes and 50% of shoes rely on the Red Sea route.
West Texas Intermediate (WTI), which serves as the benchmark for U.S. oil prices, saw a modest 0.1% increase to reach $78.06 per barrel. Brent crude, the international standard, also rose by 0.1% to hit $83.60 per barrel. Both contracts experienced a 6% gain last week.
In premarket trading, oil stocks displayed mixed performance. Exxon Mobil remained unchanged, while Chevron recorded a 0.3% decrease. On the other hand, American depositary receipts of Shell and BP rose by 0.3% and 0.6%, respectively.
Overall, the fluctuating oil prices reflect the ongoing tensions in the Middle East and the potential consequences for global energy markets.