UK ‘still at risk of technical recession’ despite November growth; oil price hits $80 after Yemen airstrikes – business live

Key events

Brent crude hits $80 for first time this year

Newsflash: the Brent crude oil price has hit $80 per barrel for the first time since 27th December.

Brent is now up almost 3.5% today at $80.10, after the US and UK attacks on Houthi-controlled areas of Yemen overnight.

Analysts at Saxo say:

Oil prices surged back to upper end of the current range, in Brent around $80, after the US and UK launched airstrikes against Houthi rebel targets in Yemen, and Iran also raised stakes as its Navy captured an oil tanker off the coast of Oman.

The gold price, often a safe-haven in troubled times, has risen a little today.

Gold is up 0.6% at $2,040 per ounce.

Marios Hadjikyriacos, senior investment analyst at XM, says the airstrikes against Yemen have boosted oil and gold.

With tensions in the Middle East already sky-high, this military strike fanned fears about a broader escalation in the region, which translated into a boost for oil and gold prices.

That said, this conflict has had little direct impact on oil production so far, so it’s questionable whether such concerns will support prices for long without further escalation that actually takes some crude barrels offline.

Oil could keep rising if tensions escalate further in the Middle East, warns Ricardo Evangelista, senior analyst at ActivTrades:

Evangelista explains:

Brent oil prices rose more than 3% over the last 24 hours as the markets reacted to an attack by British and American forces on Houthi targets in Yemen. The strikes came as a response to the militants’ attacks on transport ships crossing the Strait of Hormuz in the Red Sea, which they claim to be a legitimate form to pressurise Israel to halt operations in Gaza.

This attack is another escalation in the tensions that have been simmering in the Middle East since the October 7 Hamas attack, and the markets are reacting with apprehension. The Red Sea route, which leads to the Suez Canal, is crossed by the main shipping lanes between Asia and the West and is the main export route for Gulf oil.

With one of the most critical oil supply channels to the West under threat, it is not surprising to see crude prices rising in a dynamic that could create further upside for the price of the barrel should tensions continue to escalate in the Middle East.

Such an outcome would worry central bankers, as it would undermine efforts to bring down inflation to levels where interest rates can safely be cut….

Oil up as Middle East tensions increase

Oil is trading at its highest level in two weeks this morning, following the US and UK attacks on Houthi military targets in Yemen.

Brent crude, the industry benchmark, has jumped by 2.3% so far today to around $79.30 per barrel, its highest level since 28 December.

Oil had surged over $90 per barrel in the aftermath of the 7 October attacks. It then slipped towards the end of last year on forecasts of weak economic growth in 2024, meaning less demand for energy

Photograph: Refinitiv

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, says:

Brent crude has risen more than 2% to over $79 a barrel, as geopolitical tensions increase in the Middle East. Iran has captured an oil tanker off the coast of Oman in response to sanctions, according to reports.

Air strikes on Houthi targets in Yemen have also increased anxiety.

As flagged earlier (see here), Tesla is suspending most car production at its factory near Berlin for two weeks, due to delays to component shipments caused by attacks on vessels in the Red Sea.

Those tensions have prompted shipping firms to take the longer route around Africa, leading to delays.

Fusion Risk Management director of Third Party Risk Management Wes Loeffler warns that other firms will encounter similar problems, saying:

Organisations that have not established redundancies within their supply chains are likely to encounter delays, disruptions, or difficulties in procuring essential components that are necessary for delivering goods and services.

Introduction: UK GDP report in focus

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

New GDP data will show how the UK economy performed in November, as it flirts with a technical recession.

Economists predict the economy returned to growth in November, with GDP expected to have risen by 0.2%.

That would be a welcome pick-up, after GDP fell by 0.3% in October, and also shrank in July-September, which put Britain on the brink of a recession.

Matthew Ryan, head of market strategy at global financial services firm Ebury, says:

We expect a modest rebound in activity that should allay fears of a Q4 recession.

But, the broader picture may be that the UK economy is stuck in neutral gear, wavering between stagnation and a minor contraction.

Bloomberg says:

It’s a bleak backdrop for Prime Minister Rishi Sunak to fight the next election, though there is some prospect of an improvement later this year.

We’ll get the figures at 7am.

Also coming up today

The financial markets are on edge after US and UK forces launched air and missile strikes in Houthi-controlled areas of Yemen overnight.

The oil price has jumped 2%, up $1.5 to around $79 per barrel.

Houthi attacks have already disrupted shipping in the region (as we covered yesterday), pushing up container costs and leading to longer delays as vessels avoid the Red Sea and reroute their journeys.

The agenda