March 2, 2024
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OIL & GAS

Oil Prices Surge After Drone Attack Kills Three U.S. Troops

Crude oil prices started the week with a gain following a drone attack in Jordan that killed three U.S. military servicemen.

The bullish momentum of continuing Houthi strikes on ships in the Red Sea pushed Brent crude well over $80 per barrel, with the benchmark close to touching $84 in midmorning trade in Asia.

West Texas Intermediate moved closer to $80 per barrel following the news of the deadly attack that led many to brace up for further escalation in the latest Middle Eastern conflict.

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“We believe the death of three U.S. service members today in Jordan marks a critical inflexion point in the ongoing conflict in the Middle East and raises a spectre of a more substantial U.S. involvement in the war,” RBC Capital Market’s Helima Croft wrote in a note quoted by Reuters.

“It does appear that even with any softening we’re seeing to demand, geopolitics is shaping up so that oil prices could have more upside risk in them,” Mizuho Bank Asia chief economist Vishnu Varathan told Bloomberg.

OilPrice.com reported that Vandana Hari of Vanda Insights, on the other hand, noted that the price rise could have been more substantial: “The question is, why have we not seen Brent shoot up toward $90 or higher?” she told Bloomberg.

“There would need to be a direct hit on a Middle Eastern oil cargo or oil production infrastructure for prices to skyrocket.”

Indeed, there was a Houthi strike on a fuel tanker passing through the Gulf of Aden last week but while it helped prices go higher, it was not much higher. But this could yet change.

“With oil tankers linked to the U.S. and UK now under threat of attack, the market is likely to reprice the risk of disruptions,” analysts from ANZ said in a note quoted by Reuters.

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