Oil prices have risen due to US-UK attacks over the Red Sea attacks

Oil prices rose 4% after the US and UK launched strikes in Yemen in response to recent attacks by Houthi rebels on ships in the Red Sea.

Brent crude oil hit $80 a barrel for the first time this year as pro-Iranian rebels vowed to retaliate against military action by Western powers.

Although prices have risen, they are below the heights reached when Russia invaded Ukraine.

But the UK government fears another energy shock is possible if freight disruptions spread.

The BBC understands the Treasury is modeling scenarios including crude oil prices rising to more than $10 a barrel and a 25% increase in natural gas.

On Friday, Brent crude — the international benchmark for oil prices for much of the world — hit $80.55 a barrel, while U.S. West Texas Intermediate crude rose 2.92% to $74.94.

The UK government is concerned that continued attacks on shipping in the Red Sea could hurt the UK economy, where growth is weak.

Higher energy prices will be fueled just as inflation begins to slow. Meanwhile, the cost of shipping containers on ships has risen, meaning companies may choose to pass this cost on to consumers.

But Simon French, chief economist at Banmure Gardens, pointed out that energy prices were still significantly lower than they were four months ago.

„At these levels, it's actually very inflationary for the UK economy,” he said.

When the Bank of England makes its next interest rate decision in February, oil prices will be 20% lower than they were in the autumn, he said.

Houthi rebels in Yemen have stepped up attacks on merchant ships since the Israel-Hamas war began in October. The US has reported 27 attacks in the Red Sea since mid-November.

The group uses drones and rockets against foreign ships transporting goods through the Bab al-Mandab Strait — a 20-mile-wide channel that separates Eritrea and Djibouti on the African side and Yemen on the Arabian Peninsula.

Ships usually take this major trade route from the south to reach Egypt's Suez Canal further north. Many companies now ship around the Cape of Good Hope, a route that adds at least 10 days of travel.

Currently, a quarter of the world's shipping containers are diverted.

According to the White House, about 15% of world seaborne trade passes through the Red Sea. This includes 8% of the world's grain, 12% of marine oil and 8% of the world's liquefied natural gas.

Vincent Clerk, chief executive of shipping company Maersk, told the BBC that „significant disruption” to global trade was already being felt „all the way down to the end consumer”.

On Friday, Tesla announced it was suspending most car production at its plant in Berlin because of parts shortages due to shipping disruptions.

Earlier this week, Tesco boss Ken Murphy warned the disruption „could push up the price of some items but we don't know at the minute”.

Next, Ikea and Danone have reported delays in receiving products.

The Houthi group has declared its support for Hamas and said it targets ships traveling to Israel, although it is unclear whether all the ships attacked are actually bound for Israel.

As a result of the attacks, Maersk and many of the world's major shipping lines are avoiding a key route for global trade as they prioritize the safety of their crews.

„We have ships that are being fired upon. We have colleagues whose lives are at risk when this happens and we cannot justify sailing through these danger zones,” Mr Clarke said.

He said the long route around Africa would absorb capacity from the global shipping system in the short term, adding anything from seven days to two weeks to a ship's journey, as well as costing $1m (£783,000) in fuel alone.

Rates for moving cargo by sea hit record highs during the pandemic. Since attacks on ships in the region began, container traffic and commodity prices have rebounded.