DIGIVESTASI - Market participants' concerns about the escalation of commodity conflicts in the Middle East have gradually begun to emerge, as crude oil prices began to rise following US and UK strikes on Yemen. According to Bloomberg, US President Joe Biden confirmed that his military had carried out airstrikes against a number of targets in Yemen.

Some US officials said the strikes hit radars and missile launchers. Bloomberg sources also mentioned that British Prime Minister Rishi Sunak and his cabinet have agreed to conduct joint military strikes with the US on Yemen. The agreement was obtained through a phone call on Thursday (11/1/2024). However, the British Prime Minister's Office declined to comment on the joint military force. The White House has yet to comment.

Previously, the US and UK warned the Houthi group in Yemen of the consequences if it continued to carry out attacks on ships passing through the Red Sea - an important trade route connecting Israel, the Mediterranean Sea and the Indian Ocean. The Houthis asked ships passing through the Red Sea not to deliver goods to Israel, as a sign of Yemen's rejection of Israeli aggression against Palestine.

The Houthis also promised not to stop acting until Israel ends its attacks on Palestine. Yemen's stance since November 2023 has angered and criticized the US, an ally of Israel. Houthi leader Abdel-Malik al-Houthi replied that any US attack on Yemen would provoke a reaction from the group. On Wednesday (October 1, 2024), Houthi forces deployed drones and missiles to target US and British ships. "Any American attack will not be responded to. Our response will be greater than the attacks carried out with 20 drones and several missiles [previously]," Abdel Malik said, as reported by Aljazeera.  

Oil traders immediately reacted to the escalation of the conflict in Yemen. Bloomberg noted that Brent crude oil prices increased 2.5% to 79 USD/barrel. Investors are trying to gauge whether the US and UK strikes in Yemen will trigger a wider conflict in the Middle East. If this happens, oil production and distribution could be disrupted. The world market is currently concerned about the impact of Israel's attack on Palestine on the price of oil and some raw materials. Currently, there is widespread concern about rising temperatures in the Middle East.

OIL PRICE FORECAST DURING YEMEN AND U.S.- U.K CONFLICTS

According to Bloomberg analysis, oil prices could become even more vulnerable if Iran directly participates in the conflict, as this could threaten oil production and flow - the region is the source of 1/3 of the world's crude oil production. The escalating conflict in the Middle East has brought the risk of war to the market, which was overlooked due to rising supply from non-OPEC+ countries and slowing oil demand growth.

ING Groep NV's head of commodity strategy, Wareen Patterson, believes the escalation of the conflict in Yemen points to the possibility of greater disruption, opening up the possibility of having to divert ships, which could impact oil prices. "But the biggest risk is that it spreads and we start to see the threat of capital outflows from the Persian Gulf," Patterson said. While we believe the risk is low, the impact will be significant." 

Citigroup Company It is estimated that geopolitical risks in the Middle East have pushed Brent oil prices up by 2-3 USD/barrel. Premiums could also increase significantly if supply disruptions become widespread. Meanwhile, Standard Chartered Plc. forecasts oil prices to be at least 10 USD/barrel lower than the oil price.

Vandana Hari, founder of consulting firm Vanda Insights, believes price fluctuations will continue as the situation in the Middle East becomes more complicated. "It is an unbalanced tug-of-war between a bearish fundamental outlook and a favorable risk premium in the Middle East," Hari said. Currently, both are expected to continue in the coming months."

Traders are trying to gauge oil's future prospects as oil prices struggle to find a clear direction in 2024, swinging between gains and losses on a daily basis. According to Vitol Group, the market will be relatively balanced in 2024 as demand growth struggles to keep pace with new supply from outside OPEC. Additional support to oil prices, as well as other commodities including copper, comes from a weakening US currency, which makes purchases cheaper for foreign buyers.