Oil prices jumped more than 2% on Tuesday after Iran deployed a warship to the Red Sea following days of tensions in the critical shipping region.
West Texas Intermediate (CL=F) traded as high as $73.64 per barrel before paring gains and dipping into negative territory. Brent (BZ=F) crude rose to a session high of $79.04 per barrel.
“The Iranian Navy has dispatched a destroyer to the Red Sea as part of the flotillas that take part in regular missions in international waters,” said an Iranian news agency statement.
On Sunday the US Navy destroyed three Houthi boats following an attempted hijacking of a container ship in the Red Sea.
US helicopters fired upon the Yemeni rebel group backed by Iran upon responding to a distressed call from a Maersk vessel, according to a US Central Command statement.
“The escalation of tensions between the US & Iran has caught some fund managers attention and is bringing on some new longs,” Dennis Kissler, senior vice president at BOK Financial, wrote in a note to clients.
Oil prices temporarily rose in early December after shipping giants paused Red Sea routes amid Houthi attacks in the region in retaliation to the Israel-Hamas war.
Shipping company Maersk said it had stopped all sailing in the Red Sea for 48 hours following Sunday’s attempted attack on its vessel.
“Attacks by Houthi rebels on tankers in the Red Sea [are] causing a re-routing of some supplies, increasing tanker rates and cost,” Andy Lipow, president of Lipow Oil Associates, said in a 2024 yearly outlook note.
“The only thing certain for 2024 is continued volatility in oil prices,” added Lipow.
Crude futures lost more than 10% in 2023 in what was a volatile year. WTI and Brent rallied in the third quarter over supply concerns, only to fall in the last three months of the year amid worries over weak demand.
The yearly decline in prices came despite aggressive production cuts by oil alliance OPEC+. Deeper output cuts announced in December were met by market skepticism.
OPEC+ plans to hold an interim monitoring meeting in the first week of February, according to delegates who spoke with Bloomberg on Tuesday.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
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