Crude oil soared towards $59 a barrel after Saudi Arabia and its Gulf Arab allies began a military operation in Yemen. As Kirsty Basset reports, Yemen sits on a key shipping passage between Europe and the Arab Gulf.
The aftermath of a deadly Saudi-led air strike in the Yemeni capital, Sanaa. (SOUNDBITE) (Arabic) WITNESS, MOHAMED, SAYING: "There were 12 people inside the building, now we have uncovered six bodies. The rest are still under the rubble." Saudi decided to take military action to prevent the country from falling further into the hands of Shi'ite Muslim rebels, who are fighting to oust Yemen's president. Following the strikes, Brent crude was up more than 4 per cent towards $59 a barrel. That's despite a global oversupply. It's Yemen's geographic position which is making markets nervous. As Arab producers export oil to Europe, they must pass through a stretch of water only 40km wide between Djibouti and Yemen, considered a 'chokepoint' to global oil supplies. It's estimated 3.8 million barrels of crude oil passed through these waters every day, in 2013. Following the strikes on Sanaa airport and a nearby military base, there are fears the route could be compromised. On Thursday four Egyptian naval vessels were sent to Yemen to secure the Gulf of Aden. Head of Research at Charles Stanley, Jeremy Batstone-Carr. (SOUNDBITE)(ENGLISH) HEAD OF RESEARCH AT CHARLES STANLEY, JEREMY BATSTONE-CARR SAYING: "What is playing out in investors' minds - and on the ground - is the potential threat to supply caused by the escalation of violence and military action in the Middle East." But he also believes that while the conflict could escalate, the current threat is more imagined than real. (SOUNDBITE)(ENGLISH) HEAD OF RESEARCH AT CHARLES STANLEY, JEREMY BATSTONE-CARR SAYING: "I don't think at the precise moment in time anyone is anticipating or building in a problem with oil supply into the equation. I think if that were the case we would probably have expected the oil price to spike much higher than it has." Some currencies were affected by the buoyant oil price - Russia - being a major oil producer - saw the rouble gain 1.4 per cent.