Oil Prices Rise Amid U.S. Strikes on Houthis and Strong Chinese Data

Oil prices traded higher on Monday as the U.S. vowed continued strikes on Yemen’s Houthis, while Chinese economic data fueled optimism for stronger demand.

• Brent crude: +0.9% to $71.21/barrel
• WTI crude: +0.9% to $67.80/barrel

Key Drivers Behind the Oil Price Surge

1. U.S. Military Action Against Houthis

• President Donald Trump launched airstrikes on Saturday in response to Houthi attacks on Red Sea shipping lanes.
• U.S. officials suggest the military campaign could last for weeks.
• The Red Sea accounts for 15% of global shipping traffic, raising concerns over potential supply disruptions.

2. China’s Economic Data Boosts Demand Outlook

• Retail sales growth in January-February accelerated, signaling improved consumer spending.
• Factory output slowed, and unemployment rose, but policymakers remain optimistic about domestic demand recovery.

Market Pressures and Balancing Factors

1. OPEC+ Production Increase

• OPEC+ will raise oil output starting in April, adding supply-side pressure.
• However, analysts believe that tighter U.S. sanctions on Iran will offset the increase in OPEC+ production.

2. Ukraine Peace Talks Weigh on Prices

• Trump plans to speak with Putin on Tuesday to discuss ending the Russia-Ukraine war.
• A potential de-escalation in Ukraine could reduce geopolitical risk premiums in energy markets.

Outlook

Despite escalating tensions in the Middle East, oil remains under pressure due to global economic concerns and OPEC+ supply adjustments. However, strong Chinese demand and geopolitical risks continue to provide upside support.