Crude could climb past $120 a barrel by year-end if fighting in the Middle East keeps escalating, RBC Capital Markets warns. Houthi advances toward the Bab el-Mandeb strait and renewed tension in the Strait of Hormuz have already pushed both Brent and WTI above $100, feeding inflation fears and a fresh bond-yield surge.
Crude oil could top $120 per barrel of Brent by the end of the year if fighting in the Middle East continues, RBC Capital Markets' Helima Croft has warned, as quoted by Reuters. According to Reuters: "Maritime traffic through the Bab el-Mandeb is gravely imperiled by the Houthi advances".
Houthi advance threatens Red Sea shipping
The warning follows reports of Yemen's Houthis taking control of the Red Sea port of Mokha, which would let the group launch more direct attacks on Saudi energy infrastructure and tankers moving through the Red Sea.
Brent and WTI both clear $100
That threat compounds separate escalation in the Strait of Hormuz, on the other side of the Arabian Peninsula, which has pushed Brent crude and WTI both over $100 per barrel. Brent almost touched $110 per barrel earlier today, Reuters reported.
Rally feeds rate-hike bets
The rally has also driven a fresh surge in bond yields as inflation fears build, pushing investors to brace for interest rate hikes in major markets. A JPMorgan forecast cited in the report suggests eight to nine developed economies could raise rates by year-end, including the United States, Japan, four European central banks including the European Central Bank, and Australia and New Zealand. The bank's analysts said the tightening is likely to stay shallow for now, though risks lean toward more action given resilient growth, sticky core inflation, and commodity price pressures.
Asia feels the squeeze
Bloomberg reported that Asian economies are also feeling the pain, with governments in the region expected to extend financial assistance to businesses and households as oil prices climb and diesel prices surge. Relief looks unlikely given the trajectory in the Middle East: President Trump said this week the war will be over after the November elections, but fighting continues and neither side has raised peace talks.
Source: Investing.com
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