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Oil rises 3% on Red Sea attack

Oil rose nearly three per cent yesterday as mounting attacks by the Iran-aligned Yemeni Houthi militant group on ships in the Red Sea disrupted maritime trade.

A Norwegian-owned vessel was attacked in the Red Sea on Monday and oil major BP said it has temporarily paused all transits through the body of water. Other shipping firms said over the weekend that they would avoid the route.

Brent crude futures were up $1.98, or 2.6per cent, to $78.53 a barrel, while U.S. West Texas Intermediate crude rose $1.82, or 2.6%, to $73.25.

Both crude benchmarks posted small gains last week, following seven weeks of decline, after a U.S. Federal Reserve meeting raised hopes that the U.S. central bank's interest rate hikes are over and cuts are on the way.

"BP's decision to halt shipping through the Red Sea may have crystallized concerns for the oil market," said Tim Evans, an independent oil analyst at Evans on Energy.

"The re-routing of tankers does add cost and it does add transit time, so we are seeing... fewer barrels arriving at European refineries in the near term," Evans added.