SINGAPORE, March 17 (Reuters) - Oil prices experienced a notable increase of approximately 1% on Monday, following the United States' commitment to continue military actions against Yemen's Houthis. This group, aligned with Iran, has been responsible for ongoing attacks on shipping routes, prompting the U.S. response. By 0015 GMT, Brent crude futures had risen by 72 cents, or 1.02%, reaching $71.30 a barrel, while U.S. West Texas Intermediate (WTI) crude futures also saw a rise of 72 cents, or 1.1%, bringing the price to $67.90 a barrel.
The recent U.S. airstrikes, which the Houthi-run health ministry claims resulted in the deaths of at least 53 individuals, mark the largest military operation by the U.S. in the Middle East since President Donald Trump's inauguration in January. A U.S. official informed Reuters that this military campaign could persist for several weeks, indicating a sustained U.S. presence in the region.
The ongoing Houthi attacks on shipping within the Red Sea have significantly disrupted global commerce, compelling the U.S. military to embark on an expensive operation to intercept missiles and drones. This situation has contributed to a modest increase in oil prices, which managed to rise slightly last week, breaking a three-week losing streak. This previous decline was primarily driven by concerns over a potential global economic slowdown, exacerbated by escalating trade tensions between the U.S. and various other nations.
Analysts at Goldman Sachs have revised their oil price forecasts downward, indicating that they expect the U.S. economy to grow at a slower rate than previously projected. This change in expectations is linked to the tariffs imposed by the Trump administration on countries such as China, Mexico, and Canada. The analysts have adjusted their December 2025 forecast for Brent crude to $71 per barrel (WTI forecasted at $67), and they have also narrowed their Brent price range to $65-80 per barrel. Furthermore, their average forecast for 2026 stands at $68 for Brent and $64 for WTI.
Additionally, oil demand is anticipated to grow at a more modest pace than previously thought, while production from the Organization of the Petroleum Exporting Countries and its allies (OPEC+) is expected to exceed earlier forecasts. This oversupply could further impact global oil prices and market stability.
In the United States, consumer sentiment has plummeted to its lowest level in nearly two and a half years as of March. Concerns surrounding inflation expectations have surged, primarily due to fears that the sweeping tariffs implemented by the Trump administration could lead to higher prices and negatively affect the economy. As U.S. Federal Reserve officials prepare for their upcoming meeting, expectations are that they will maintain the benchmark overnight interest rate within the 4.25%-4.50% range, having previously reduced it by 100 basis points since September. This decision reflects their ongoing assessment of the economic repercussions stemming from the Trump administration's policies.
In summary, the recent military actions and trade tensions have significantly influenced oil prices, with fluctuating forecasts and consumer sentiment reflecting broader economic concerns. The interplay of these factors will continue to shape the oil market in the coming weeks.