Oil prices and oil stocks are up this morning on news that BP (NYSE:BP) will pause shipments through the Red Sea due to escalating attacks on transport vessels. This has apparently almost completely slowed trade through the Sea’s major trade routes.
What do you need to know about the latest from BP?
Well, according to the oil company, one of its fuel tankers was hit by an “unidentified object” last Monday, Dec. 11. Since then, attacks have been occurring regularly.
Iran-backed Houthi militants from Yemen are behind the attacks, claiming responsibility for attacks on two MSC vessels on Friday.
“In light of the deteriorating security situation for shipping in the Red Sea, BP has decided to temporarily pause all transits through the Red Sea,” BP said in a statement. “We will keep this precautionary pause under ongoing review, subject to circumstances as they evolve in the region.”
Not just BP either, Norway’s Equinor ASA (NYSE:EQNR), one of the world’s largest container shipping lines, made a similar announcement today.
As a result of the changes, vessels will be forced to sail around Africa, adding thousands of miles to their journeys.
Oil Prices Jump on Suspended Red Sea Shipments
Oil prices have been climbing on the news. Indeed, both Brent crude and West Texas Intermediate are up nearly 3% today as the threat of supply hiccups raises prices. Oil stocks are climbing as well, with BP stock in the green by 1.55% at the time of writing.
Natural gas prices have also been on the move. Europe’s fuel prices jumped nearly 8% to $39.04 per megawatt hour.
Some economists, like Rico Luman at ING, have speculated that the violence on the seas may notably affect inflation. More than 80% of traded global goods are transported by sea. As such, this disruption could notably affect consumer goods prices in Europe and North America.
Consumer goods will face the largest impact, though current disruptions are occurring during the off-peak shipping season,” Chris Rogers, head of supply chain research at S&P Global Market Intelligence, told CNN.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
