Oil prices experienced a nearly three percent surge on Monday as more shipping companies halted their operations in the Red Sea following attacks on vessels by Yemen’s Iran-backed Huthi rebels.
The rebels claimed responsibility for attacking two vessels with “Israeli links,” part of a series of drone and missile strikes in the Red Sea, aimed at influencing Israel’s stance on the conflict with Hamas in the Gaza Strip.
In response to the escalating situation, five major shipping firms, including global giants such as British Petroleum (BP) and Taiwan’s Evergreen, announced the rerouting of their vessels away from the Red Sea.
This move is significant as ships must traverse the Red Sea to access the Suez Canal, a crucial route for cargo and oil transportation.
Simultaneously, U.S. stock markets aimed to continue the previous week’s positive momentum, driven by expectations that the U.S.
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Federal Reserve might reduce interest rates next year. However, this optimism appeared to lose traction in Asia and Europe.
Investors also kept a close eye on the upcoming meeting of the Bank of Japan, although speculation about a shift from the current no-hike policy has diminished.
Despite this uncertainty, equity indices remained poised to finish the year on a high note.
The Federal Reserve’s indication of easing monetary policy, coupled with favorable economic indicators, led to record highs in the Dow and Nasdaq on Wall Street.
Analysts, however, anticipated a slowdown in the buying frenzy, and indeed, by the end of the week, there was a pullback as investors took a cautious stance.
Despite this, indices like the Paris CAC 40 and Frankfurt’s DAX had reached unprecedented levels.
As the year approaches its end, Neil Wilson, chief market analyst at Finalto Trading Group, expressed confidence in substantial gains for the most part in 2023.
While some speculated up to six rate cuts by the Federal Reserve, the bank’s “dot plot” forecast indicated three cuts.
The Bank of Japan’s decision, expected on Tuesday, has generated discussions about a potential departure from years of ultra-loose policy.
However, analysts suggest that any significant policy changes may not occur immediately.
The Bank of Japan has maintained negative interest rates and controlled bond prices to stimulate the economy, but with rising inflation and a struggling yen, indications suggest a possible shift.
Economists at Societe Generale noted, “The BoJ has little need to rush into making policy changes,” adding that markets would be closely monitoring for any signs of adjustments.
