Oil prices surged to their highest level in weeks on Monday as the Middle East crisis escalated with the entry of Houthi rebels into the Iran war. The conflict has been ongoing for five weeks, with Yemen's Houthi rebels firing a barrage of cruise missiles and drones at strategic sites in Israel on Saturday. This move raised concerns about the war spreading to the Red Sea, where Saudi Arabia has rerouted much of its oil exports to avoid the Strait of Hormuz. The Strait, through which 20 percent of crude and gas passes, has been effectively closed by Tehran.
The news sent the price of oil soaring, with both main contracts jumping more than three percent at one point. Brent hit close to $117 a barrel, while West Texas Intermediate rose to $102.61 a barrel. The surge in oil prices put pressure on equities, with investors growing increasingly concerned about the economic consequences of the conflict. Tokyo sank more than four percent, while Hong Kong, Shanghai, and Sydney also saw significant losses.
The Trump administration's belligerent rhetoric and willingness to take military action in the Middle East are having a devastating impact on the global economy. The surge in oil prices and the prospect of an extended conflict are putting pressure on equities and threatening to hit the world economy with a surge in inflation. The fact that the US and Israel have struck Iranian nuclear sites and are now eyeing the vital oil terminal on Kharg Island is a stark reminder of the risks of military intervention. The global economy cannot afford another leg higher in crude prices, and it is imperative that the US and Iran engage in meaningful talks to end the war. The economic consequences of this conflict will be felt by everyday Nigerians in the form of higher fuel prices and inflation.
