Oil Prices Decline Amid Ongoing Tensions in the Middle East
U.S. futures rose by 0.6% on Friday as investors awaited what could be one of the most consequential reads on inflation in years. The S&P 500, Dow Jones Industrial Average, and Nasdaq futures all saw gains.
In a separate development, Yemen's Iranian-backed Houthi rebels captured a strategic island in the Bab el-Mandeb Strait, threatening oil exports by Saudi Arabia through one of the world's key commercial lanes. This move has further intensified tensions in the Middle East, causing oil prices to ease on Friday. Brent crude, the international standard, fell 3.6% to $103.74 per barrel, while benchmark U.S. crude dropped 3.4% to $99.02.
The capture of the island has led to a significant decline in Saudi oil production, with the International Energy Agency reporting that it fell to a three-decade low last month due to Houthi attacks on its energy facilities. This reduction in supply is expected to remain for the rest of the year, adding to inflation uncertainties.
Despite the decline in oil prices, they are still up around 8% for the week on renewed fighting. Diesel prices have soared to an all-time high above $6 a gallon on average, with Russia and the Middle East being affected by geopolitical violence that has upended operations.