Oil prices were up nearly 1 per cent on Monday after the US bombed Yemen's Houthis for a second night, warning of an “unrelenting” attack on the militant group, and as China announced stimulus plans to boost its tepid economy.
Brent, the benchmark for two thirds of the world's oil, was up by 0.88 per cent at $71.18 a barrel at 11.19am UAE time. West Texas Intermediate, the gauge that tracks US crude, rose by 0.89 per cent to $67.78 a barrel.
Oil prices are expected to remain in a holding pattern but unlikely to go on a sustained rally as lingering uncertainty over US trade policy and mounting concerns about the economic outlook are capping risk appetite and limiting the commodity's upside, said Dilin Wu, a research strategist at broker Pepperstone.
“The escalation of Red Sea tension over the weekend was a key driver behind oil’s gap higher at Monday’s open … vessel attacks could raise transport costs and amplify supply risks – factors that objectively support higher crude prices,” she said.
“On the supply side, [US President Donald] Trump’s latest move to tighten sanctions on Iranian and Venezuelan oil exports is constraining output, adding another layer of upward pressure on prices … [and] with global growth slowing and trade tension dampening demand, the fundamental picture hasn’t turned decisively bullish.”
Mr Trump on Saturday launched large-scale military strikes against Iran-backed Houthis in Yemen over the group's attacks targeting Red Sea shipping, in the largest military operation in the Middle East since he took office in January.
American planes bombed Yemen's Houthis for a second night on Sunday as US Defence Secretary Pete Hegseth pledged “unrelenting” attacks on the militant group.
The Houthis earlier claimed to have fired rockets and drones at an American aircraft carrier, though US officials said all of the projectiles were intercepted.
“The minute the Houthis say we'll stop shooting at your ships, we'll stop shooting at your drones, this campaign will end, but until then it will be unrelenting,” Mr Hegseth told Fox News late on Sunday.
Houthi-affiliated Al Masirah TV reported US strikes attacked Hodeidah and Al Jawf. “If they continue their aggression, we will continue the escalation,” Houthi leader Abdul Malik Al Houthi said on Sunday, pledging to continue attacking US ships in the Red Sea.
Authorities in China, meanwhile, on Monday, pledged to provide more support to stabilise stock and property markets, support wages and prop up birth rates, in an effort to boost consumption the world's second-largest economy.
Government data on Monday showed better than expected factory data, a key component of the economy, as industrial output climbed nearly 6 per cent in the first two months of 2025 from a year earlier, while retail sales gained 4 per cent.
However, the property market – which has been a drag on the Chinese economy – remained tepid, as home prices fell and investments into real estate slid 10 per cent from the same period last year.
Despite the mixed signals, oil rose on the Chinese stimulus plans, “but the gains are fully given back” over the worsening trade war and its negative impact on growth global growth prospects, as well as the possibility of the end to the Russia-Ukraine war, said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.
“Worries regarding the property crisis and the shrinking population remain on the back of investors’ mind despite the artificial intelligence-led boost in Chinese equities this year,” she said.
Oil prices ended up last week as hopes faded for a rapid resolution to the Ukraine war, which may help bring back Russia energy supplies to the market.
The International Energy Agency had lowered its oil demand growth forecast for 2025 by 30,000 barrels per day to 830,000 bpd and its estimate for next year by 70,000 bpd to 1.03 million bpd.
“The macroeconomic conditions that underpin our oil demand projections deteriorated over the past month as trade tensions escalated between the US and several other countries. New US tariffs, combined with escalating retaliatory measures, tilted macro risks to the downside,” the agency said in its monthly oil market report.
