DTN Oil

NEW YORK (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange jumped more than 4% in overnight trading, sending international crude benchmark above $80 barrel (bbl) for the first time this year after a U.S.-led coalition launched more than a dozen attacks against Houthi targets in Yemen, risking an escalatory spiral in the broader Middle East conflict.

U.S. and U.K. military overnight struck a number of key Houthi targets near Yemen's capital Sanaa, including logistical hubs, air defense systems, weapons storage, and launching locations, according to officials. The strikes represent the first U.S. military response to scores of drone and missile attacks on commercial ships by the Iran-backed Houthi militants in Yemen.

"These strikes are in direct response to unprecedented Houthi attacks against international maritime vessels in the Red Sea -- including the use of anti-ship ballistic missiles for the first time in history," said U.S. President Joe Biden in a statement released by the White House.

As of Friday morning, Houthi leaders said that all U.S. and U.K. interests are now legitimate targets, adding that the attacks will not go without a retaliatory response.

Although traders speculated that it's unlikely the conflict would metastasize into a regional war, the risk to oil supplies and energy infrastructure has always been present.

In September 2019, Houthis carried out successful attacks against Saudi oil processing facilities at Abqaiq and Khurais oil field, temporarily removing 5.7 million barrels per day (bpd) or half of Saudi oil production in a matter of hours. For context, Saudi crude oil production is currently 9 million bpd -- the lowest in 30 years outside the pandemic years.

In response to the developments, Saudi Arabia's Foreign Minister Faisal bin Farhan Al-Saud Friday morning called for restraint from all parties and "avoiding escalation."

Earlier this week, Houthi militia fired their largest-ever barrage of drones and missiles targeting shipping in the Red Sea, with U.S. fighter jets responding by shooting down 18 drones, two cruise missiles and an antiship missile. And on Thursday, Iranian Navy seized a U.S. oil tanker in the Sea of Oman, carrying 1.04 million bbl of oil that was loaded at the Basra port in Iraq. The oil tanker was seized by the United States in 2023 for allegedly trying to sell more than 980,000 bbl of Iranian oil to China in violation of U.S. sanctions.

Container ships have been forced to reroute voyage through the Suez Canal and Red Sea -- the shortest path between Europe and Asia, to around the Cape of Horn of Africa because of the Houthi attacks, raising global transport costs. Should the conflict in the Red Sea region persist or escalate further, it would add oil and energy-driven cost pressures to the inflation data across countries that are part of the Organization for Economic Cooperation and Development.

Near 8:30 a.m. EST, ICE March Brent futures advanced $2.42 to $79.83 bbl, retreating from an overnight high of $80.75 bbl. West Texas Intermediate February futures on NYMEX rallied $2.33 bbl to near $74.35 bbl. NYMEX February ULSD futures rallied $0.0911 to $2.7649 gallon, NYMEX February RBOB futures gained $0.0630 to near $2.1773 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com