A wider escalation could drive up the price of oil and many consumer goods.
U.S. airstrikes against Houthi targets in Yemen on Thursday night escalated an ongoing conflict over a shipping route that holds significant implications for oil prices and inflation.
The military operation, undertaken in partnership with the United Kingdom, came in response to a monthslong series of attacks carried out by Iran-backed Houthi rebels on freight ships in the Red Sea.
Houthi Defense Minister Mohammed Nasser Al-Atefi said in a statement on Wednesday that the group would respond to the attack carried out by the U.S. and U.K.
The U.S. attack could cause a spike in oil prices and inflation if it sets off a wider escalation of the Israel-Gaza war, deepening supply chain woes and fueling price increases for many essential goods, analysts . Oil prices surged 3% in early trading on Friday partly due to fear of such a scenario, they added.
The immediate impact of the attack appears notable but limited, analysts said, since many of the major shipping companies had already diverted their routes in response to the threat posed by the Houthis, analysts said.
“The absolute worst case scenario from a supply chain standpoint is if this escalates into a shooting war between the U.S. and Iran,” Jason Miller, a professor of supply-chain management at Michigan State University, . “It would result in a massive increase in energy prices and if oil goes up, everything goes up.”
“Right now most carriers had already decided to reroute around the Red Sea, so this doesn’t change the dynamic there too much,” Miller added.
