The Red Sea crisis is continuing to underpin oil prices, with the most recent attacks hinting that the situation is set to prolong further. Major shipping company, Maersk, had to turn around two ships – even though accompanied by the US Navy – after seeing explosions nearby.
And plenty of other companies are also doing the same thing. The latest news is that Australian mining giant, BHP Group, is set to divert all of its shipments from Asia to Europe away from the Red Sea. And while not mentioned, oil shipments are also caught in the crossfire as well.
The whole situation is helping to keep oil prices underpinned and WTI crude is now trading up to its highest levels since 1 December 2023:
WTI crude oil daily chart
As shipping costs and supply chains get disrupted alongside higher oil prices, all of this risks stoking the inflation fire for the time being. In turn, major central banks will have to be rather careful in pushing too hard on any disinflation narrative.
For now, the overall impact is still rather minimal I would say so central banks can still get away with whatever they want. But if the situation in the Red Sea is one that persists for a longer period, it could slow down the speed at which inflation returns towards the desired level that markets and policymakers are hoping for.