Capital Economy, Business and Finance
Oil prices rose and the UK Treasury modelled further oil and gas price spikes after US and British airstrikes on Houthi targets overnight. The strikes on more than a dozen military targets in western Yemen have drawn the Nato allies into an expanding Middle Eastern conflict – and into a losing argument about whether their actions are directly linked to Israel’s war on Hamas. Statements from the White House and Downing Street said the actions were in self-defence to deter Houthi rocket attacks on commercial and western naval shipping in the Red Sea. Houthi leaders, relishing a showdown with Washington, have been clear that their attacks are in support of Palestinians in Gaza, and have labelled the response “American-Zionist-British aggression”. Iran condemned what it called a clear violation of Yemen’s sovereignty and Russia called for an urgent meeting at the UN. There are good grounds for Biden and Sunak to try to compartmentalise the crisis. Some of the Houthi attacks have directly targeted their warships and nearly 2,000 commercial freighters have been forced to re-route via South Africa rather than risk the Suez Canal. But the bigger picture is clear: the war in Gaza is expanding precisely as Biden wished it wouldn’t.