Oil prices rise on escalating Middle East tensions

Oil futures (CL=F, BZ=F) rose on Friday after the US and its allies launched strikes in Yemen against Iran-backed Houthi rebels.

Yahoo Finance Senior Business Reporter Ines Ferré reports on the latest oil price action and how escalation of tensions in the Red Sea will impact Iran oil supply.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Eyek Ntekim

Video transcript

[AUDIO LOGO]

JARED BLIKRE: Oil surged today as tensions in the Red Sea escalated following attacks by the US and its allies against Yemeni sites controlled by Iran-backed Houthi rebels. Brent and crude oil prices rose as much as 3% at session highs today. Ines Ferre has been closely following this. And Ines, what are some of the details here?

INES FERRE: Yeah, Jared. So today, we saw Brent Crude oil go higher. We also saw WTI go as high as 4% during the session after the US had announced that the US with its allies had done strikes on some sites, some Yemeni sites that are controlled by Houthi rebels in retaliation for Houthi rebels having attacked vessels in the Red Sea area. Of course, we've been hearing about this tension in the Red Sea for weeks now. And we have seen oil on a daily basis, it can go up 2% or 3%. But we did see today that oil then faded.

So we did see that WTI closed the session roughly 1% higher. You've got Brent Crude that closed the session up 1%, just north of $78 per barrel. But Brent had gone up north of $80 per barrel during the session today. WTI had gone up above $75 per barrel. In fact, I'm going to pull up a two-month chart here, so you can see the tight range that we've been trading in throughout January as these escalations have taken place.

What's different now is that there was a shipping advisory that-- advisor that had noted that ships or cargo ships, vessels have now been advised to stay away from this area. We have seen shipping giants that voluntarily have stayed away or they are rerouting along the Cape of Africa. But today, we saw a giant oil tanker firm that said that they would be avoiding the area and they own about 80 vessels that carry refined products, refined energy products from the refineries to the customers. So tankers are definitely staying clear of the area now and that's creating concerns in the markets.

But the real concern is, when you talk to analysts is, is that this could escalate into something greater, into something greater between the US and Iran and interrupt Iran's oil supply because Iran produces almost 3 million barrels of oil per day. One analyst telling me if you took that off the market, you could see oil shooting up by about $30 per barrel. So right now we are seeing also freight costs that are going higher, of course, because this trip that they have to now take along the Cape of Africa takes about 7 to 14 days longer, guys.

JOSH LIPTON: Ines, a big important story. Thanks so much for bringing that to us

INES FERRE: Thank you.