- The oil price rises significantly as airstrikes from the US and its allies on Houthi rebels have deepened supply disruption concerns.
- The likelihood of a retaliation from Iran-backed Houthis is high, which could widespread conflicts in Middle East.
- Investors are optimistic about interest rate cuts by the Fed in March.
West Texas Intermediate (WTI), futures on NYMEX, has climbed strongly to near $74.50 as investors worry about deepening oil supply concerns due to mounting tensions for merchant vessels through Red Sea. The US military has launched multiples airstrikes on Iran-backed Houthi group in retaliation for attacking commercial shipments of oil.
The airstrikes from the US military and its allies are expected to disrupt trade flows through Suez Canal and will also escalate Middle East tensions. A widespread conflict in the Middle East will elevate oil supply disruptions this 2024 and will keep prices of WTI higher.
The upside risks to oil prices have elevated amid a likelihood of oil supply disruption in times when the global economy is recovering from pessimism of restrictive interest rate environment and high price pressures.
Meanwhile, investors’ confidence towards a rate cut by the Federal Reserve (Fed) in March despite higher consumer price inflation has provided some strength to the oil price. A sharp recovery in the global economy is highly anticipated if the Fed plans an early rate cut as predicted by market participants. This will also spurt the global oil demand and eventually its prices.
Going forward, investors will focus on China’s Q4 Gross Domestic Product (GDP) and Industrial Production data for further action. The Chinese economy has been struggling for a firm-footing due to lower export orders and vulnerable domestic demand post Covid. It is worth noting that China is the leading importer of oil in the world and an economic slowdown in the Asian giant impacts the oil price.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD holds above 1.0450 after German sentiment data
EUR/USD stays in positive territory above 1.0450 after retracing a portion of its bullish opening gap. The data from Germany showed that the IFO - Current Assessment Index declined to 84.3 in November from 85.7, while the Expectations Index edged lower to 87.2 from 87.3.
GBP/USD pulls back toward 1.2550 as US Dollar sell-off pauses
GBP/USD is falling back toward 1.2550 in the European session on Monday after opening with a bullish gap at the start of a new week. A pause in the US Dollar decline alongside the US Treasury bond yields weighs down on the pair. Speeches from BoE policymakers are eyed.
Gold price manages to hold above $2,650 amid sliding US bond yields
Gold price maintains its heavily offered tone through the early European session on Monday, albeit manages to hold above the $2,650 level and defend the 100-period Simple Moving Average (SMA) on the 4-hour chart. Scott Bessent's nomination as US Treasury Secretary clears a major point of uncertainty for markets.
Bitcoin consolidates after a new all-time high of $99,500
Bitcoin remains strong above $97,700 after reaching a record high of $99,588. At the same time, Ethereum edges closer to breaking its weekly resistance, signaling potential gains. Ripple holds steady at a critical support level, hinting at continued upward momentum.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.