Crude oil prices jumped to their highest levels since 4 March following US military strikes on Yemen’s Houthi group at the Red Sea over the weekend.

During the early Asian session, the West Texas Intermediate (WTI) futures at NYNEX rose as much as 1.5% to $68.19 per barrel, and the Brent futures at ICE jumped 1.42% to $71.58 per barrel before pulling back. The natural gas futures price also climbed nearly 1% to $4.14 per million British thermal units (MMBtu) during the same time frame.

Additionally, China announced a special plan to boost domestic consumption, alongside a slew of positive economic data, adding to the demand optimism. China’s retail sales rose 4% in the first two months of this year, accelerating from a 3.7% increase in December.

Houthi resumes Red Sea attacks

The Red Sea and the Suez Canal are vital routes for oil and gas shipments between Europe, Asia, and North America. In late 2023, the Iran-backed Houthi group, designated as a Foreign Terrorist Organisation by the United States, launched attacks on commercial vessels in the Red Sea, following Israel’s retaliation against Hamas in Gaza. The Red Sea unrest had previously caused a surge in energy shipping costs, as oil and gas cargo shipments were forced to take longer routes. Last week, the group said it would resume attacks after the six-week ceasefire in Gaza as Israel halted all humanitarian aid.

On Saturday, US President Donald Trump ordered military attacks on Houthi militia sites in Yemen in response to disruptions in shipping routes. He posted on the Truth Social that attacks on American vessels will not be tolerated. Pentagon chief Pete Hegseth said the US military strikes will be “unrelenting” until Houthis stops military attacks, during an interview on Fox News.

Crude prices rebound from multi-year lows

Earlier this month, crude prices fell to their lowest levels since November 2021 last week due to darkened economic outlooks amid an escalating global trade war. The ceasefire talks aimed at ending the war in Ukraine have also sparked concerns about a return of Russia’s production.

In February, China imposed 10% levies on crude oil and 15% on liquified natural gas (LNG) from the US in response to Trump’s tariffs. Last week, Trump proceeded with a 10% tariff on Canadian oil. Meanwhile, the OPEC+ decided to start hiking its production by 138,000 barrels per day in April. These factors contributed to a plunge in crude prices, with both benchmarks experiencing sharp declines—Brent down 16% and WTI down 18% since mid-January.

Last week, crude prices rebounded from their respective multi-year lows on news that the US will tighten sanctions on Iran. Iran accounts for 24% of the Middle East’s oil reserves and 12% of global reserves, according to the EIA. Its oil exports have increased since 2022, following Russia’s invasion of Ukraine, with current supply reaching 1.5 million barrels per day, or 1.4% of global production.

Additionally, Russian President Vladimir Putin demands changes to the US ceasefire deal, also diminishing hopes for an immediate truce in the Ukraine war. A weakened US dollar and a potential oversold technical signal may have also supported the rebound.

However, analysts expect the rebound in oil prices to be capped by economic concerns. “Lingering uncertainty over U.S. trade policy and mounting concerns about the economic outlook are capping risk appetite, limiting oil’s upside,” said Dilin Wu, a research analyst at Pepperstone.

Oil supply to outpace demand in 2025

However, the International Energy Agency warned last week that global oil supply could exceed demand by approximately 600,000 barrels per day in 2025, due to record production in the US and weakened demand amid rising global trade tensions, despite growing demand in China.

US inventory data showed weekly stockpiles increased for six out of seven weeks since mid-January. Crude inventories rose by 1.45 million barrels in the week ending 7 March, following a 3.6 million build in the previous week. The US crude oil field production steadied at a near-record high of 13.58 million barrels per day in early March.