Oil perks up as Red Sea tensions spark investor jitters. In response to attacks on ships in the Red Sea by Yemen’s Houthi forces, which are associated with Iran, concerns over disruptions to global commerce and geopolitical tensions in the Middle East kept global oil benchmark Brent trading at about $80 per barrel on Wednesday.

By 1327 GMT, U.S. West Texas Intermediate crude gained 87 cents, or 1.2%, to $74.81 a barrel, while Brent crude futures increased by 81 cents, or 1%, to $80.04 a barrel.

Tuesday’s benchmarks saw a gain of over 1% due to some corporations rerouting their boats, which resulted in higher transportation and insurance costs.

On Wednesday, Greece warned commercial ships operating in the Red Sea and the Gulf of Aden to stay out of Yemeni seas. Greek shipowners possess around 20% of all commercial vessels worldwide by carrying capacity. In the meantime, Washington established a task team on Tuesday to protect trade in the area.

“Thus far, the U.S.-led naval mission to mitigate Houthi attacks has failed to ease broad concerns about safe passage through the Red Sea, with major maritime carriers still choosing to steer clear amid the tensions,” said Yeap Jun Rong, market strategist for I.G.

The Houthis pledged to oppose the American-led military operation and to continue attacking ships in the Red Sea to aid the Hamas organization, which rules the Palestinian enclave of Gaza.

Over 12% of all maritime traffic travels via the Suez Canal and the Red Sea. Analysts noted that shortages have not yet materialized while the oil supply has rebalanced.

Ole Hansen, an analyst at Saxo Bank, stated, “The market will eventually adjust to changing supply routes as long as production is not threatened.”

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“It is not a far-fetched thought to attribute the present advance in prices as much to rate-cut expectations, falling bond yields, and healthy equity markets as to the geopolitical temperature,” Tamas Varga of PVM, an oil dealer, said.

Recent data indicates that the European Central Bank’s efforts to control sticky inflation have had a significant impact.

Statistics released on Wednesday revealed that German producer prices decreased more than anticipated in November. The previous day, another set of statistics revealed that year-over-year inflation in the eurozone had dropped significantly to 2.4% in November.

Furthermore, the case for interest rate reductions was strengthened in November, when British inflation fell to its lowest level in more than two years.

Additionally, investors have stuck to their projections of 150 basis points in rate reduction by the U.S. Federal Reserve for the next year, which gained momentum last week as the bank revealed more aggressive rate cuts in 2024.

According to the Energy Department’s report on Tuesday, the United States purchased 2.1 million barrels of oil for delivery in February, which further raised prices as the nation continues to restock its stocks.

According to sources quoting data from the American Petroleum Institute, U.S. oil and gasoline stockpiles also increased last week, defying experts’ predictions of a drop in crude stocks based on a Reuters poll.