Oil price falls amid easing tensions in the Middle East

Geo-political developments and market reaction

Despite the easing of tensions, there are still concerns about supplies, particularly due to logistical disruptions in the Red Sea. The UK Maritime Trade Operations (UKMTO) reported an attack on a vessel carrying two missiles south of the Yemeni city of Al Mukha, indicating the ongoing threat from Iran-aligned Houthi militants in Yemen. These developments have significantly impacted global shipping and caused some companies to avoid Red Sea routes. On a positive note, the increase in oil and natural gas drilling in the US indicates a potential increase in production, with domestic production reaching a record 13.3 million barrels per day. However, demand concerns remain as the US Federal Reserve signals further efforts to curb inflation, which could dampen economic growth and oil demand.

Supply concerns and global market dynamics

Despite easing tensions, supply concerns persist, particularly due to logistics disruptions in the Red Sea. The UK Maritime Trade Operations (UKMTO) reported an attack on a ship by two missiles south of Yemen’s Al Mukha, highlighting ongoing threats from Iran-aligned Houthi militants in Yemen. These developments have significantly impacted global shipping, prompting some companies to avoid Red Sea routes. On a more positive note, increased oil and natural gas rigs in the U.S. suggest a potential rise in output, with domestic production hitting a record 13.3 million barrels per day. However, demand concerns linger as the Federal Reserve signals continued efforts to curb inflation, potentially dampening economic growth and oil demand.