Oil prices edged higher on Monday as geopolitical tensions escalated following U.S. military strikes on Yemen’s Houthi rebels. The attacks were a response to the Iran-aligned group’s continued assaults on commercial shipping in the Red Sea. The White House confirmed that the campaign, initiated on Saturday, could extend for weeks, aiming to deter further disruptions to global trade.
By 10:17 GMT, Brent crude futures had climbed 63 cents (0.9%) to $71.21 per barrel, while U.S. West Texas Intermediate (WTI) crude rose 62 cents (0.9%) to $67.80. The market is closely watching the geopolitical landscape, as prolonged instability in key shipping lanes could tighten global supply chains and push prices higher.
UBS analyst Giovanni Staunovo noted that while tensions remain high, no significant supply disruptions have been recorded yet. However, the oil market’s physical fundamentals appear stable, with near-term contracts still trading at a premium to later deliveries, a sign of sustained demand.
China’s Economic Data Fuels Optimism
Oil prices received additional support from China’s latest economic indicators, which suggested a potential boost in energy demand. The world’s largest crude importer reported stronger-than-expected retail sales growth in January and February, reinforcing hopes of a consumption-driven recovery.
- Retail sales increased significantly, exceeding forecasts.
- Industrial output saw marginal deceleration, though overall factory activity remained robust.
- Unemployment in urban areas ticked upward, signaling ongoing economic restructuring.
Despite some mixed signals, analysts expect Beijing to introduce further stimulus measures to sustain momentum. Given China’s critical role in global oil consumption, any positive shift in demand outlook could lend continued support to crude prices.
OPEC+ and U.S. Sanctions Keep Market in Balance
While geopolitical risks and economic data are influencing short-term price movements, broader market fundamentals are also at play. OPEC+ has planned to increase oil production starting in April, which could temper price gains. However, tightening U.S. sanctions on Iran may offset some of the expected supply boost.
Saxo Bank’s Ole Hansen pointed out that “China’s plans to boost consumption and fresh Red Sea risks” remain the primary drivers of Monday’s price action. Market participants are also monitoring diplomatic developments in Ukraine, as any resolution to the ongoing conflict could reshape global energy flows.
Despite recent gains, Brent remains down nearly 5% year-to-date due to persistent fears of a global economic slowdown. Trade tensions between the U.S. and key partners continue to add uncertainty, potentially capping bullish sentiment in the oil market.
Conclusion: Oil prices are navigating a complex landscape shaped by geopolitical tensions, economic data, and supply dynamics. With the U.S. ramping up military action in the Red Sea and China signaling potential demand recovery, crude markets remain volatile. Investors will be watching for further policy decisions from Beijing and ongoing developments in the Middle East to gauge the next direction for oil prices.
