Alright, so oil and natural gas prices shot up like crazy because BP announced it’s hitting the pause button on all shipments through the Red Sea. They’re doing this because of increased attacks by Houthi militants from Yemen on commercial ships.
BP’s Decision and the Price Surge
BP, one of the big players in the oil game, said they’re taking a break from sending stuff through the Red Sea because of safety issues for ships. This move might have a big effect on how things move globally and might make it more expensive to ship goods around.
Because of this news, oil prices shot up fast! Brent crude, which is a big global benchmark for oil, surged by 2.7% to $78.64 a barrel. Meanwhile, US oil jumped by 2.8% to $73.44 a barrel.
And it’s not just oil—natural gas prices in Europe spiked like crazy too. They shot up by 7.7% to above €35.75 per megawatt hour. That’s not as high as the record-breaking €320 per megawatt hour we saw in August 2022 during Europe’s energy crisis, but it’s a clear sign that things are getting shaky in the markets after these attacks.
Houthi Attacks and Response
So, these Houthi rebels, backed by Iran, have been making aerial attacks. They’ve been getting more frequent ever since the Israel-Hamas war broke out. These militants have claimed these attacks as payback against Israel. Now, the US and its pals are thinking about beefing up a task force in the Red Sea to protect the ships.
Shipping Giants Hit Pause
Check this out: major shipping companies like MSC, Maersk, CMA CGM, and Hapag-Lloyd have said, “Nope, we’re not going through the Suez Canal right now.” That’s the canal that connects the Red Sea to the Mediterranean Sea, where Israel’s hanging out. Even Evergreen Group’s shipping arm joined in, saying they’re hitting pause on shipping to Israel until things chill.
The Impact on Trade
This disruption could seriously mess up supply chains, causing delays and hiking up costs. Some ships are already taking the long route around Africa’s Cape of Good Hope, adding three weeks to their trips and more fuel costs.
The Suez Canal is a big deal for trade—about 30% of the world’s container trade goes through there. If this mess continues, shipping rates might go up, and companies might have to pay more as they move their stuff around.
Possible Impact on Prices and Inflation
The thing is, a lot of the stuff we buy comes by sea. If shipping gets slower or more expensive, it could affect prices on things like gadgets or clothes. Remember during COVID when shipping issues caused prices to go up? Yeah, it might be a bit like that.
But here’s the thing: the demand for shipping isn’t crazy high right now, so prices might not shoot up like they did during the pandemic. The shipping industry has more space on its hands, which might stop prices from going through the roof.
Basically, BP’s move to stop Red Sea shipments, along with other shipping companies hitting pause, has caused a stir in the energy markets. Oil and natural gas prices spiked, and there’s worry that supply chains might get messed up. Whether this turns into higher prices for the stuff we buy depends on how long this chaos lasts. For now, it’s a wait-and-see game to figure out how this affects the global market.