Oil prices rise as Saudi Arabia launches air strikes in Yemen

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Houthi fighters ride a patrol truck in Sanaa March 25, 2015Image source, Reuters
Image caption,
The airstrikes came after Iran-backed rebel groups marched on the port city of Aden

Oil prices rose and shares fell after Saudi Arabia, the world's biggest crude exporter, and its allies launched airstrikes on rebel targets in Yemen.

The move has raised concerns that the conflict could spread in the oil-rich Middle East and possibly disrupt supplies from the region.

Brent crude climbed nearly 6% to $59.78 a barrel, but then dipped to $57.88.

West Texas Intermediate crude futures, the US benchmark, rose to $50.68 a barrel.

Pressure on the oil price eased after it became clear there was no immediate threat to Middle East oil shipments. However, fears remain that Iran could be drawn into the conflict, and these concerns weighed on European share markets on Thursday.

In Germany, an economy heavily dependent on oil imports, the Dax share index was more than 1.3% lower by mid-afternoon. Paris's Cac 40 index and London's FTSE 100 were both more than 1.2% lower.

In the US, the Dow Jones was down 0.6%, and the dollar also fell against the Swiss franc and the yen, traditionally seen as haven currencies in times of uncertainty.

Yemen is located along an important international shipping route for global energy producers. But the country is sliding towards civil war.

Houthi rebels receiving support from Iran have marched on the southern Yemeni port city of Aden, where Yemen's President Abdrabbuh Mansour Hadi took refuge after he was forced him to flee the capital, Sanaa.

Saudi Arabia, supported by regional allies the United Arab Emirates, Bahrain, Qatar and Kuwait, launched airstrikes on Thursday aimed at halting the rebel advance.

Iran and Saudi Arabia are both members of the Organisation of Petroleum Exporting Countries, the group that produces about 40% of the world's oil. Oil exports to Europe pass through the narrow Red Sea strait between the port of Aden and Djibouti.

However, the current glut in global oil stocks, built up in part thanks to US shale production and plentiful output from Russia and other producers, means there is unlikely to be an acute crisis in supply.

"Just because Saudi and others conducted air strikes doesn't mean the oil market becomes suddenly tight," said Masaki Suematsu, manager of the energy team at brokerage Newedge Japan in Tokyo.