Oil fell as a broad risk-off tone across markets coupled with a stronger U.S. dollar offset concerns over Middle East tensions, including continued attacks on ships in the Red Sea by Iran-backed Houthi rebels.

Benchmark Brent was below US$78 a barrel after ending narrowly higher on Tuesday, with West Texas Intermediate near $72. In Asia, China reported mixed data that highlighted the lack of a recovery in the key crude importer. On currency markets, the U.S. dollar extended its biggest one-day jump since March as traders recalibrated expectations for when the U.S. Federal Reserve will start cutting interest rates. That hurt commodities including crude.

Tensions in the Middle East, meanwhile, remain front and center. Houthi militants in Yemen are still threatening shipping in the waterway off their coast despite U.S.-led strikes. There’s concern the Israel-Hamas war will spread beyond Gaza, potentially drawing in Iran directly. Two of Iran’s neighbors, Iraq and Pakistan, have reported recent attacks by Tehran on their soil.

In another sign of fallout, some insurers are starting to avoid covering U.S. and U.K. ships against war risks when they navigate the southern Red Sea. Many oil and gas carriers are now avoiding the waterway, forcing them to take a longer route around southern Africa. Egypt reported that Suez Canal transits were down by almost a third on-year in the first 11 days of the year.

Oil’s been confined to a narrow range since the start of the year, as the Middle East crisis hasn’t so far led to a direct hit to production. Traders will get dual insights into the outlook later Wednesday as the Organization of the Petroleum Exporting Countries releases its monthly market assessment, and a U.S. industry group issues estimates for crude stockpiles.

“The good news, and the likely reason why oil benchmarks have not surged, is that global oil supply from the attacks in the Red Sea have not been affected,” said Vivek Dhar, an analyst at Commonwealth Bank of Australia. “The bad news is that the alternative route around Africa takes 14 days longer.”

Broader financial markets including stocks fell after Wednesday’s data from Beijing, which showed that retail sales missed forecasts and property investments continued to struggle. Crude eased along with copper and other industrial commodities.

In the U.S., freezing temperatures have curbed refinery operations in the processing hub of Texas and shut in more than half of North Dakota’s oil production. As much as 650,000 barrels a day is offline, up from 425,000 barrels on Monday, the North Dakota Pipeline Authority said.

Prices:

• Brent for March settlement fell 0.8 per cent to $77.69 a barrel at 3:19 p.m. in Singapore.
• WTI for February delivery retreated 0.9 per cent to $71.76 a barrel.