Brent crude, the global oil benchmark, prices surged nearly 5 per cent in two days to above $114 per barrel, giving a hit to stock markets in Asian countries. This is Brent Crude's highest level since May this year. Meanwhile, US-based WTI Crude remained elevated as well, trading over $100 per barrel.
The sudden spike in Brent Crude prices was fueled by the Houthis ' recent attacks in Saudi Arabia. The event further strengthened the energy supply chain corners from the Gulf region as Saudi is a key oil-exporting nation.
Last seen, Brent crude was trading at $114.1 per barrel, up $0.92 or 0.81 per cent. US West Texas Intermediate (WTI) crude was quoted at $100.5, up $1.05 or 1.06 per cent.
2 Key Reasons Behind Spike In Crude Prices
Houthi Attacks On Saudi Arabia
Saudi Arabia, a key energy exporter, has been under attack for the past few months. The recent attacks by Houthis sparked escalation in supply chain disruption, sending shock to crude oil prices in international market.
According to Reuters, Saudi Aramco, the largest oil company in the world, asked its employees to evacuate its headquarters in Dhahran as fighting with Yemen's Houthis intensified.
2- Constraints at the Strait Of Hormuz
The disruption of ship traffic through the Strait of Hormuz, a key route for energy supply from the Gulf nations, remained the key trigger for oil prices since the US attacked Iran in February this year.
The renewed tension between the US and Iran, after they failed to reach any peace deal, mounted pressure on energy prices. Brent crude was trading near the $110 per barrel level for the past week amid a tight tussle between the US and Iran.
Stock Market Debacles
The elevated crude rates have been a key concerns for a nation like India that import over 85 per cent of its oil needs. The development has been persistently sending shockwaves to the domestic equity market.
The key domestic indices--Sensex and Nifty--opened in green today; however, they dragged into negative territory amid a sell-off.
Last seen, Sensex was trading at 72,709.09, falling significantly by 0.74 per cent or 540.30 points. Nifty50 was quoted at 22,456.15, down 1.02 per cent or 231.50 points.
"Brent near $114 is the dominant risk for India. At this level, oil is no longer just creating temporary pressure on sentiment; if sustained, it could keep inflation expectations elevated and gradually affect consumption and corporate profitability," said Hariselvan Radhakrishnan, Founder & CEO of HST Wealth.
High crude prices remain a key headwind for oil-sensitive sectors, making a broad-based equity recovery difficult without a sustained cooling in energy markets, he added.
"WTI crude oil prices continued their gradual upward trajectory, trading near the $100-per-barrel mark. A persistently elevated crude oil prices and dollar-related pressures continue to pose challenges to further rupee appreciation," Ponmudi R, CEO of Enrich Money.