Global oil prices are approaching US$100 a barrel, driven by escalating attacks from Yemen's Houthi rebels on commercial vessels in the Red Sea. For consumers and businesses already grappling with inflation, this marks a fresh threat: higher fuel and transport costs could ripple through the economy, pushing up everything from gasoline to retail goods.
The Red Sea is a critical shipping lane for oil and liquefied natural gas, carrying about 12 percent of global seaborne trade. Since November, Houthi forces have launched repeated strikes on ships they claim are linked to Israel, forcing major carriers such as Maersk and BP to reroute vessels around the Cape of Good Hope. The detour adds weeks to transit times and sharply raises freight and insurance costs.
Brent crude has climbed roughly 10 percent since the attacks intensified, breaching US$95 a barrel this week. Analysts say the premium for war risk is now built into prices, reflecting fears of a prolonged disruption. The situation is compounded by already tight global supply, as OPEC+ continues output cuts.
For Canada, a major oil exporter, higher global prices boost revenues for producers but also translate into higher pump prices for drivers. The national average gasoline price has already ticked up, and economists warn that sustained oil above US$95 could slow economic growth and complicate the Bank of Canada's inflation fight.
The next few weeks will determine the trajectory. If Houthi attacks subside or a naval protection force is deployed, prices could ease. But if the crisis deepens, the world may face its first oil supply shock since the war in Ukraine.