Oil prices surge as US, UK forces launch strikes against Huthi

This photograph taken on 12 January, 2024, shows an oil refinery in the desert between Shubaytah and Shubaytah, of the Dakar rally 2024, in Saudi Arabia, on 12 January, 2024AFP

Oil prices surged four per cent on Friday after US and UK forces launched strikes against Iran-backed Huthi rebels following their attacks on ships in the Red Sea, fuelling worries about a wider conflict in the crude-rich region.

Tokyo and European stock markets ended the week with strong gains as traders brushed off data showing US inflation rose more than expected in December.

Wall Street had ended flat on Thursday, while the dollar was closing the week with gains against the euro.

Ahead of annual earnings from top US banks, focus was on the luxury sector after British fashion brand Burberry posted a profit warning, sending its share price sliding more than nine per cent nearing the half-way stage in London.

That fed through to peers, with Gucci-owner Kering losing 1.7 per cent in Paris, where LVMH was down 1.4 per cent.

The oil market was in sharp focus as US and British forces struck rebel-held Yemen on Friday after weeks of attacks on Red Sea shipping by the Iran-backed Huthis, who say they are acting in solidarity with Palestinians in war-ravaged Gaza.

“The fear in the oil market is that the region is on an unpredictable escalating path, where at some point down the road supply of oil will indeed in the end be lost,” noted Bjarne Schieldrop, chief commodities analyst at SEB bank.

The Huthis have carried out a growing number of strikes on vessels in the Red Sea, a key international shipping route, since the Gaza war erupted in October.

The attacks have affected trade flows at a time when supply strains are putting upward pressure on inflation globally.

The jump in oil prices sparked concerns about a fresh spike in inflation that could complicate central bank efforts to cut interest rates.

The US consumer price index rose more than forecast in December, dealing a blow to prospects that the Federal Reserve would start its rate-cutting cycle in March.

Interest rates around the world had surged in 2022 and 2023 in a bid to cool decades-high inflation.

While rates of price rises have slowed, inflation remains above target for the Fed, European Central Bank and Bank of England.

Key figures around 1100 GMT

Brent North Sea Crude: UP 4.0 per cent at $80.51 per barrel

West Texas Intermediate: UP 4.0 per cent at $74.88 per barrel

London - FTSE 100: UP 0.8 per cent at 7,635.09 points

Paris - CAC 40: UP 1.0 per cent at 7,462.96

Frankfurt - DAX: UP 0.9 per cent at 16,685.69

EURO STOXX 50: UP 0.9 per cent at 4,481.85

Tokyo - Nikkei 225: UP 1.5 per cent at 35,577.11 (close)

Hong Kong - Hang Seng Index: DOWN 0.4 per cent at 16,244.58 (close)

Shanghai - Composite: DOWN 0.2 per cent at 2,881.98 (close)

New York - Dow: FLAT at 37,711.02 (close)

Euro/dollar: DOWN at $1.0962 from $1.0969

Dollar/yen: DOWN at 145.15 yen from 145.29 yen on Thursday

Pound/dollar: DOWN at $1.2754 from $1.2770

Euro/pound: DOWN at 85.93 pence from 85.94 pence