The Houthi militia reported a new attack on Riyadh airport on October 8. AP quotes an eyewitness describing an evacuation; Reuters reported smoke over an aircraft. Lufthansa and Indian airlines suspended flights to Riyadh. The NZZ writes of 82 Saudi strikes on Houthi targets, which is a single report. Iran threatened to block further routes through the Strait of Hormuz. The WTI price rose 3.6 percent to around $91.5. Trump said the US would not attack Iran before the midterm elections, but, according to Bloomberg TV, made contradictory statements about talks.
A war around the Gulf states hits energy prices, air traffic and interest rates at the same time. The longer oil stays expensive, the less room central banks have to cut rates.
Heating oil, gasoline and flights may get more expensive with some delay. If you are traveling to Saudi Arabia, check your flight status with the airline.
Trump’s pledge lowers the risk of escalation in the short term; the US is taking its time.
The pledge is tied to an election date and contradicts other statements. For markets the risk remains high.
The price move shows that the market takes attacks on infrastructure more seriously than political pledges. Today we are watching three things: whether Riyadh airport resumes normal operations, whether Swiss and other airlines change their plans, and whether Iran turns its threat over the Strait of Hormuz into action. As long as that is open, the oil quote remains the most important number of the day.
Reuters · AP · NZZ · FT · Bloomberg (Oct. 8/9)
Houthi attack on Riyadh drives up the oil price. Trump: No strike on Iran before the midterm elections
The Houthis report a new attack on Riyadh airport, and Lufthansa and Indian airlines cancel flights. The WTI price rises 3.6 percent. Trump commits himself, but his statements on Iran remain contradictory.
The conflict over Iran and Yemen moved the markets again on Thursday. The Houthi militia reported a new attack on the airport of the Saudi capital, Riyadh. AP, citing an eyewitness, reports an evacuation, and Reuters reported smoke over an aircraft at the airport. The extent of the damage has not been independently verified. Lufthansa and Indian airlines suspended their flights to Riyadh, Reuters writes. Swiss is also part of the Lufthansa Group; we have not checked whether it is adjusting its schedule. The NZZ reports in its live ticker that Saudi Arabia struck 82 Houthi targets in Yemen in return; so far this is a single report. According to Reuters, Syria and Turkey are considering help for Riyadh, though Ankara rules out taking part in offensives. In the oil market, the American grade WTI rose 3.6 percent to around $91.5 a barrel. Iran is also threatening to block further routes through the Strait of Hormuz; Reuters sees a higher risk for tankers as a result. Washington imposed new sanctions on Iran’s shadow fleet. A large share of the world’s traded oil passes through the Strait of Hormuz, so even threats are enough to move prices. AP reports that US stock futures gave way after the explosions in the Saudi capital while crude rose. Reuters also writes that, after the shelling of Saudi airports, Syria too is considering help in the Yemen war. That shows how quickly the conflict can spread across the region.
Politically, Donald Trump caused a stir. The US will not attack Iran before the midterm elections in November, he said, according to Reuters, the FT, the NZZ and Bloomberg. Bloomberg TV also quoted him as saying there had been “productive talks” with Iran and that attacks would be suspended; shortly afterwards it reported that he was no longer seeking a deal. Both quotes come from brief reports, and we have not checked the wording. Three things count for Switzerland. First, the price: an expensive barrel makes heating oil, gasoline and airline tickets more expensive, with some delay. The Ryanair chief said, according to Reuters, that the “absurdly high” jet fuel price could persist until 2028. Second, inflation: Fed policymaker Waller said, according to Reuters, that further rate hikes are needed, but that there is “room” on the pace. Third, the franc, which is in demand as a safe haven in such phases; overnight the dollar cost about 0.83 francs. Asia is already reacting: states are building up oil stocks and expanding renewable energy faster (Reuters). Shell has partly restarted its Pearl plant in Qatar, which converts natural gas into liquid fuel (Reuters). The aircraft carrier USS Abraham Lincoln returned to San Diego after a long deployment in the Middle East, AP and Le Temps report. That can be read as a sign of easing tension, but it is no proof that the danger is receding. Today we are watching whether the oil and aviation markets calm down and whether Iran turns its threats into action.