Oil prices increase after Houthi rebels launch drone strikes on oil facilities.

 

Houthi Rebels in Yemen. CNBC/Reuters.

Oil prices have reached a seven year high after a major drone strike launched by Houthi rebels hit oil facilities in the United Arab Emirates. CNBC.  The attack occurred yesterday and killed three people. The attack caused a major spike in oil prices, which have already been driven higher by inflation and concerns about a conflict with Ukraine and Russia. The attack was the most significant against the UAE, who has joined the war against the Houthi rebels in Yemen, along with Saudi Arabia. However, their involvement has been limited since 2019.

My Comment:

I am not sure why the Houthis launched this attack, though they may have been directed to do so by their Iranian sponsors. The UAE has not been a major participant in the war in Yemen for a while now and if anything would draw them back into war this is it. Given how the war is going fairly well for the Houthis it makes little sense to bring them back into the war. 

Of course the war in Yemen is largely irrelevant. The killing has gone on for awhile now and outside of Yemen and Saudi Arabia I doubt too many people care if the UAE joins the war again. Other than a few bleeding hearts and people concerned about the proxy war between Saudi Arabia and Iran. 

But oil prices? That's a huge problem. Gas prices are already high enough but any more damage to Saudi Arabia or the UAE's oil production could make them explode. Even a major expansion of the war in Yemen could lead to this outcome. In short, nothing good can come from the Houthi rebels actions here. 

The big winners here are Iran and Russia. Iran has largely been sanctioned out of the international oil markets and higher prices could break that. Plus they get to humiliate their Gulf State enemies with more strikes like these. They almost certainly provided the drones that caused this strike in the first place. 

Russia wins as well. They are in a major diplomatic row right now over Ukraine, a situation I still believe has been massively overblown. Higher energy prices give them more leverage and helps their economy quite a bit. 

But the biggest losers, not counting the people that die of course, is normal Americans and Europeans. Gas prices are a huge burden to consumers and the cost of energy increases prices for pretty much everything. Any event that causes disruption to oil supplies, or even spooks investors, makes everything you buy more expensive. Expect higher prices at the pump soon...