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Oil prices volatile as Iran deploys warship to Red Sea amid escalating tensions

Ines Ferré
·Senior Business Reporter
Updated ·2-min read

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.

ANKARA, TURKIYE - DECEMBER 31: An infographic titled 'US Navy helicopters sink Houthi boats in Red Sea' created in Ankara, Turkiye on December 31, 2023. US Navy responded to an attempt by four vessels from Houthi-controlled areas to board the Maersk Hangzhou, deploying helicopters and sank three small boats. (Photo by Elmurod Usubaliev/Anadolu via Getty Images)
US Navy responded to an attempt by four vessels from Houthi-controlled areas to board the Maersk Hangzhou, deploying helicopters and sinking three small boats. (Elmurod Usubaliev/Anadolu via Getty Images) (Anadolu via Getty Images)

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.

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"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% during a volatile 2023. 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 late November 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.

A 20mm Phalanx CIWS weapons defense cannon is mounted on the U.S. Navy destroyer USS Gravely on March 14, 2023. (AP Photo/John C. Clark, File)
A 20mm Phalanx CIWS weapons defense cannon is mounted on the US Navy destroyer USS Gravely on March 14, 2023. (John C. Clark/AP Photo, File) (ASSOCIATED PRESS)

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.

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