$100 Brent Crude as Red Sea Attacks Spark Global Market Jitters
Brent crude has surged past $100 per barrel for the first time since late May, following attacks on two Saudi oil tankers in the Red Sea. The strikes by Houthi militants sparked large fires on board and sent shockwaves through global markets, causing prices to jump.
The US military carried out a 12th consecutive night of strikes against Iran on the same night as the tanker attacks, with President Trump warning that 'major military punishment' would follow if Tehran was found responsible. The Houthis are backed by Tehran and have been embroiled in a blockade of Saudi-linked shipping through the Bab el-Mandeb Strait.
The surge in Brent crude brings prices back to the level seen in March, when US and Israeli forces launched strikes on Iran. European natural gas futures also jumped sharply, rising to €62/MWh from a June low of €41. This move could push UK household energy costs higher towards the end of the year.
The Bank of England's Monetary Policy Committee voted last month to hold interest rates at 3.75%, but with six members opting for no change and three voting to raise by 0.25 of a percentage point. The Bank is also running down its bond holdings, cutting its portfolio from £895 billion to around £529 billion over the past year.
The UK government's plans to cut household bills through measures such as stripping VAT from energy bills could be complicated by the rising cost of oil. Economists estimate that the package could take around 0.2 percentage points off CPI inflation later this year, but price growth is still expected to push past 3.5 per cent.