Tensions in the Red Sea that have disrupted trade and driven up oil prices are unlikely to be short-lived, according to a markets expert.

Rebecca Babin, senior equity trader at CIBC Private Wealth, spoke with BNN Bloomberg on Wednesday about developments in the crucial trade route that, in her view, have “pushed back” the idea that the disruptions would be “short-lived.”

Specifically, she pointed to continued attacks by Houthi rebels on ships in the Red Sea and subsequent moves in the price of oil. 

“We have this consensus view that it's not about supply being disrupted right now. It's about how long it takes that barrel to get to where it needs to go, and that's really what's driving the price increase,” Babin said. 

Attacks on ships by Yemen-based Houthi militants continued in the Red Sea on Tuesday, despite a U.S.-led task force being deployed in the area to deter them. Shipping company Hapag-Lloyd AG said it will keep its ships away from the area due to the risks. 

OIL PRICE IMPACT

Oil prices have moved higher with increased shipping times as companies avoid the Red Sea route, Babin noted.

West Texas Intermediate (WTI) was trading at US$73.88 per barrel late afternoon Wednesday after reaching $76.09 on Tuesday. 

The global benchmark Brent traded around $80 per barrel after a 2.5 per cent increase on Tuesday.

Another key factor impacting the crude oil market is worsening tensions between the U.S. and Iran, Babin said. She noted that the U.S. had previously not implicated Iran directly in the ongoing tensions in the region, but that “changed over the weekend." 

The Iran-backed Houthis have targeted Israeli-linked vessels during Israel’s war with Hamas, though their attacks have also struck ships without clear ties.

The U.S. released intelligence on Friday suggesting Iran has been "deeply involved in planning the operations against commercial vessels in the Red Sea," according to CNN reporting.

Babin predicted further oil price increases if the U.S. ratchets up its rhetoric regarding Iran's involvement.

“We could see another three to five per cent come into pricing if the U.S. is starting to become more aggressive in their reactions to what's happening in the Red Sea and implicate Iran more directly,” Babin said. 

With files from Bloomberg News and the Associated Press.