SEOUL, October 24 (AJP) — Global oil prices surged to nearly six-month highs Friday as attacks on Saudi Arabia and mounting shipping risks around the Gulf deepened supply fears, adding fresh pressure to South Korea's inflation outlook.
Brent crude futures settled at $116.72 a barrel, up $3.55, or 3.14 percent, their highest close since April 29.
U.S. West Texas Intermediate crude rose $3.80, or 3.8 percent, to $103.27 a barrel.
Brent gained 6 percent for the week, while WTI advanced 2.3 percent.
The rally followed a series of attacks by Yemen's Iran-aligned Houthis across Saudi Arabia, including energy infrastructure, as fighting intensified between the group and a Saudi-led coalition.
Saudi Aramco ordered staff to evacuate its headquarters in Dhahran on Thursday amid the escalation.
Supply concerns were compounded by an oil spill detected from a tanker off the coast of Umm Al Quwain in the United Arab Emirates, while attacks and other security incidents involving commercial vessels have intensified around the Strait of Hormuz and nearby waterways.
The renewed surge in energy prices spilled into U.S. financial markets, where the S&P 500 energy sector climbed 2.5 percent to a record high on Friday.
Broader Wall Street indexes ended lower, with the Dow Jones Industrial Average falling 1.23 percent, the S&P 500 losing 0.52 percent and the Nasdaq Composite slipping 0.21 percent.
The benchmark U.S. 10-year Treasury yield rose 3.7 basis points to 4.99 percent as persistent inflation concerns offset some of the safe-haven demand that had driven yields sharply lower a day earlier.
The latest increase in crude prices comes as major economies are already grappling with renewed energy-driven inflation pressures.
The U.S. Department of Energy on Friday authorized an emergency exchange of up to 400,000 barrels of crude from the Strategic Petroleum Reserve to address a supply disruption affecting Phillips 66's Lake Charles refinery in Louisiana.
Germany's oil stockpiling agency has also moved to sell crude and refined products from strategic reserves, while production at two Libyan oilfields was reduced after a pipeline valve leading to the Zawiya export terminal was shut.
For South Korea, which depends heavily on imported energy, the latest oil surge adds to price pressures that were already building before Friday's rally.
Won-denominated import prices rose 1.7 percent in September from August and 17.6 percent from a year earlier, according to the Bank of Korea (BOK), as a sharp increase in crude prices outweighed the impact of a stronger won.
Dubai crude averaged $113.71 a barrel in September, up 28.1 percent from $88.75 in August.
Consumer inflation stood at 2.9 percent in September, while core inflation excluding food and energy was 2.8 percent.
The BOK on Thursday kept the base rate unchanged at 3.00 percent after two consecutive increases in July and August, but said inflation was likely to remain above its 2 percent target for a considerable period.
The central bank expects this year's headline inflation to remain broadly in line with its August forecast of 2.7 percent, while next year's rate is now expected to exceed the previous 2.3 percent projection.
It identified global oil prices and the exchange rate among the main uncertainties surrounding the inflation outlook.
Governor Shin Hyun-song said after Thursday's rate decision that the pass-through of cost pressures from rebounding oil prices was strengthening even as the won appreciated.
The Monetary Policy Board said it would determine the timing and pace of any further rate increases after assessing inflation, growth and financial stability.
The next rate decision is scheduled for Nov. 26, when the BOK will also release updated economic forecasts.
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