Saudi Arabia, the world’s biggest exporter of crude, finally ends its military campaign on Yemen and in doing so quelling rising oil prices in the market. The price of Brent crude rose at the onset of Saudi Arabia’s coalition bombing of Yemen but finally dropped below $60 dollars a barrel and settling at $57.88.
Yemen itself produces little oil but is in a strategic location for many global energy producers as it is found within an important shipping route in the Middle East. Although there was little to worry that the conflict would affect oil shipments, pressure caused oil prices to gradually hike for fear that other oil producing countries would be drawn into the country’s increasing internal conflict, which has inexorably affected its neighboring countries.
Brent crude is the world’s benchmark in global price of crude oils originating from the Atlantic Basin. The trader’s fears are justified as a spike in Brent Crude would mean that other oil and crude products would steadily increase in price. The easing tension is a welcome relief for exporters and traders who were worrying that the conflict would eventually cause oil prices to spike even further.
The country’s three-week operation focused on halting advancing Iran-allied Houthi rebels marching through Aden, a port city in Yemen where President Abdurabbuh Mansour Hadi had taken refuge after being force the flee Sana’a, the country’s largest city and capital. Oil regularly passes through cities like Aden, through the narrow Red Sea Straight and into the Suez Canal where it is then shipped to Europe and other parts of the world.
The situation in Yemen has at many times almost erupted into a full-fledged civil war. The arrival of the Houthi rebels only served to escalate fears of unrest and political instability. Saudi Arabia and its allies’ response were to initiate airstrikes in an attempt to prevent the rebels from marching further into Yemen and elsewhere. However, many analysts took note Saudi Arabia’s impetus for this action was to ‘correct’ oil prices that were steadily increasing due to oversupply.
Both Iran and Saudi Arabia are one of the largest producers and exporters of oil, producing more than 40% of the world’s oil. It is currently not known how the latest military campaign would spell for the two countries’ relationship, although there are requited fears that their conflict will eventually spill away from proxies like Yemen and out into the open.