Oil Prices Surge as Red Sea Attacks Drive Shipping Route Diversion

Oil futures continued trading near two-week highs after a surge triggered by escalating ship attacks in the Red Sea, prompting major shipping companies to divert routes and heightening concerns over global oil supply.

Following attacks and disruptions in the Red Sea region, BP Plc and Equinor announced halting shipments, leading to a nearly 3% surge in oil prices on Monday. The Yemeni Houthi rebels' attack on a Norwegian tanker added to the tension.

Maersk, a leading shipping company, declared plans to redirect its vessels away from the Red Sea, opting for routes bypassing Africa via the Cape of Good Hope, contributing to supply worries as 12% of global maritime trade passes through the Suez Canal.

Jefferies analysts warned of potential pressure on tanker shipping with the longer South Africa route. However, the announcement of a special international maritime task force by US Defense Secretary Lloyd Austin to safeguard Red Sea trade somewhat tempered the market's reaction.

Named "Prosperity Guardian," the joint operation involves several countries including the US, UK, and others. Despite warnings from Houthi spokesman Mohammed Abdulsalam about ongoing attacks on Red Sea shipping, analysts suggest limited impact on actual oil flows.

While geopolitical risks have surged, experts like John Evans from PVM and Goldman Sachs analysts believe supply disruptions may not significantly affect crude oil and LNG prices, citing alternative shipping options.