Red Sea risks could push oil prices up as Asia feels pinch of cargo delays, rising costs

The tensions have ratcheted up war premiums on shipping freight, with many taking longer journeys after being diverted from the troubled Red Sea route

Oil supplies to Asia are unlikely to be affected unless Iran gets involved in the war, but escalation of violence could increase uncertainty around energy markets

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A cargo ship travels on the Suez Canal in Ismailia Province, Egypt, January 13, 2024. Photo: Xinhua

Published: 6:30pm, 16 Jan 2024Updated: 6:33pm, 16 Jan 2024

The latest escalation in violence in the Red Sea between US-backed forces and Houthi militants may not affect oil supply to import-dependent Asia, but could push the price of the commodity higher.

Oil prices jumped more than 2 per cent last week, hitting the highest intraday level this year after American and British forces launched dozens of air strikes against Houthi militants in retaliation for attacks on Red Sea shipping that the Iran-backed fighters say is a response to the war in Gaza.

On Tuesday morning, Brent Crude was trading above US$78 a barrel, while West Texas Intermediate was marginally below US$73, hours after the Yemeni militants attacked a US-owned commercial ship with a missile.

The attack followed a warning by the Houthis of a “strong and effective response” after the United States carried out a strike.

The tensions have ratcheted up war premiums on shipping freight, with many having to take a longer route since late last year. Now, more oil and gas tankers are being diverted from the troubled Red Sea route.