Oil prices surge as Brent hits $108 after Yemen Houthi Red Sea threat rattles ASX 200 and tech stocks

Brent oil prices jumped 2.5 per cent to $US108.40 a barrel on Monday morning after an Iranian-backed Houthi militant group in Yemen threatened to widen the Middle East conflict by attacking shipping in the Red Sea.

Soaring energy prices and little progress towards a peace deal with Iran over the weekend sent Australia’s flagship S&P/ASX 200 Index down 0.9 per cent in early trade. The share index has fallen for the last four weeks.

The technology sector plunged 4 per cent as worries about rising interest rates and technologies linked to artificial intelligence extended a six-month wipeout for a sector that used to be an investor favourite.

Wisetech tumbled 6 per cent to a five-year low of $36.10, and Xero lost 5.7 per cent to $68.69 at its lowest since the COVID-crash in March 2020.

Oil gains

Asian traders reacted to a weekend of strikes in the Middle East that included the US and Israel bombing Iranian nuclear and steel facilities by pushing oil higher.

Australia and New Zealand Bank’s economics team warned that Houthi attacks on oil tankers transiting the Bab al-Mandab strait at the southern end of the Red Sea, between Yemen and the Horn of Africa, could place another chokehold on global supplies.

“Saudi Arabia has managed to get around the effective closure of the Strait of Hormuz by utilising its east-west pipeline to get up to 6 million barrels a day of oil to the international market via the Red Sea,” said ANZ Bank.

“That could be a potential target for the Houthis, who are based in Yemen. They throttled much of the traffic through that crucial waterway for two years starting in 2023 in response to Israel’s war in Gaza.”

Benchmark oil futures are close to their highest level since March 19, when Iran attacked Qatar’s Ras Laffan liquefied natural gas export facility.

On Monday morning, the dollar fell to its lowest price since January, $US68.5 cents, as traders dumped currencies considered vulnerable to a steep economic downturn. The dollar is down 3.3 per cent versus the US dollar since the Iran war erupted on February 27.