Oil prices rally as Saudis begin air strikes in Yemen

Oil prices rallied for a second straight day yesterday after Saudi Arabia and its Gulf Arab allies began air strikes in Yemen, sparking fears of a bigger Middle East battle that could disrupt world crude supplies.

The military operation against Houthi rebels, who have driven the president from Yemen’s capital Sanaa, has not affected oil facilities of major Gulf producers, but fears the conflict could spread has stoked concerns about Middle East oil shipments.

Iran, which backs the Houthi rebels, denounced the air strikes. Russian president Vladimir Putin, in a phone conversation with his Iranian counterpart, called for an “immediate ceasefire”. Pakistan, a Riyadh ally far away from the conflict, promised a “strong response” to any threat to Saudi integrity.

US Secretary of State John Kerry touched on the conflict with Iran’s foreign minister before talks yesterday on Tehran’s nuclear issue.

Analysts doubt any possibility of an all-out war and say only a temporary lift to oil prices is expected amid continued worries about oversupply.

Benchmark Brent oil jumped 5% before paring gains as the dollar rebounded from Wednesday’s drop, making dollar-denominated commodities costlier in other currencies.

Brent was up $2.45, or 4%, at $58.93 a barrel.

Reuters