Oil surges over 2% on Red Sea ship attacks and hopes of rate cuts

OIL climbed more than 2 per cent on Tuesday to its highest level this month, as further attacks on ships in the Red Sea prompted fears of shipping disruptions and on hopes of interest rate cuts that could boost economic growth and fuel demand.

Brent crude futures settled US$2, or 2.5 per cent, higher at US$81.07 a barrel, after rising as much as 3.4 per cent during the session. US West Texas Intermediate crude rose by US$2.01, or 2.7 per cent, to US$75.57.

The rally, in thin trade with some markets closed for holidays, added to last week’s gains of about 3 per cent after Houthi attacks on ships worried investors and as the violence in Gaza showed no sign of easing.

“There’s plenty of geopolitical tensions today in terms of the Middle East ... and it has given some angst here to the security of the transit of oil and other goods,” said John Kilduff, partner with Again Capital LLC.

Yemen’s Iran-backed Houthi militia claimed responsibility for a missile attack on Tuesday on a container ship in the Red Sea, and for an attempt to attack Israel with drones.

An Israeli minister on Tuesday hinted that the country had retaliated in Iraq, Yemen and Iran for attacks carried out against it as the war with Hamas-led militants in the Gaza Strip widens to other areas of the region and the Palestinian death toll continues to climb.