Oil prices rose after Britain and the United States carried out military strikes against targets in Houthi-controlled areas of Yemen, as tensions in the Red Sea mount further.

Global benchmark Brent was trading around 4% higher at 6 a.m. ET Friday, $80.55 a barrel, while the U.S. West Texas Intermediate futures climbed 4.22% to $75.07 per barrel.

“These targeted strikes are a clear message that the United States and our partners will not tolerate attacks on our personnel or allow hostile actors to imperil freedom of navigation in one of the world’s most critical commercial routes,” U.S. President Joe Biden said in a statement Thursday evening.

While the U.S. has carried out strikes on Iranian proxies in Syria and Iraq since the outbreak of the Gaza war, this would be the first known strike against the Iran-backed Houthis in Yemen.

The Houthis have been attacking vessels in the Red Sea, targeting global shipping vessels including those from the U.S. and Israel, in retaliation for the war in Gaza that has so far killed nearly 23,000 people in the Palestinian enclave.

Major shipping companies stopped traversing the Suez Canal and Red Sea routes in early December, choosing to reroute via southern Africa instead. That’s resulted in longer and more expensive journeys which pushed up ocean freight rates.

In a televised speech on Thursday, the leader of Yemen’s Houthis, Abdul-Malik al-Houthi, vowed that any American attack on the group will not go without response.

“We will confront the American aggression. Any American aggression will never remain without a response,” he said, cautioning that the response will be greater than “at the level of the recent operation” that the group is carrying out at sea.

In announcing the strikes on Thursday, Biden vowed he “will not hesitate to direct further measures to protect our people and the free flow of international commerce as necessary.”

Oil prices rose on Tuesday after Iran dispatched a warship to the Red Sea, as the situation remains tense in the critical waterway for global shipments that has seen vessels attacked by Yemen’s Houthi rebels.

Global crude benchmark Brent jumped 2.5% to $78.97 a barrel, while the U.S. West Texas Intermediate gained 2.5% to $73.43 per barrel during Asia trading hours. 

Iran on Monday announced it sent the Alborz destroyer through the strategic Bab al-Mandeb Strait, the country’s state media reported, without elaborating on details of the warship’s mission. It added that operations are periodically conducted in the Red Sea to secure shipping routes.

The move comes after the U.S. Navy destroyed three boats of Iran-backed Houthi rebels, killing 10 militants, according to an AP report. The Navy was responding to a distress call by Singapore-flagged vessel Maersk Hangzhou which had come under Houthi fire, the U.S. Central Command said in a statement.

In a statement by a rebel spokesman on Sunday, the Houthi group maintained that the boats were engaged in “official duties to secure maritime routes”, a news channel owned by the rebels stated. 

“Any escalation of conflict in this region is certainly going to add more of a risk premium on Brent,” Bernstein’s Senior Energy Analyst Neil Beveridge told CNBC. He noted, however, that there won’t be any major impact just yet.

“We haven’t seen the Iranian naval incursions before. And as long as it really doesn’t lead to any escalation, then I don’t really see any significant impact at this level,” he added.

The Houthi group has been attacking vessels in the Red Sea, targeting Israeli ships and other vessels headed to or from Israel, in retaliation for the country’s war in Gaza that has so far killed nearly 22,000 people there.

Major shipping companies stopped traversing the Suez Canal and Red Sea routes in early December, choosing to reroute via southern Africa instead — a longer and more expensive journey with ocean freight rates hitting as high as $10,000 per container. 

German container shipper Hapag-Lloyd said Friday it would continue to divert its vessels around the Suez Canal.

However, the launch of Operation Prosperity Guardian, a multinational maritime force, by the U.S, has bolstered the confidence of shipping companies. Danish shipping giant Maersk said Sunday it would resume operations in the Red Sea and the Gulf of Aden.

Crude oil prices could see a spike on Monday but the overall impact of the attack on Israel by Palestinian militants Hamas will likely be limited, energy experts told CNBC.

That’s provided the conflict does not escalate further, they said.

“We may see a knee-jerk surge in crude prices when markets open on Monday,” Vandana Hari, CEO of Vanda Insights, told CNBC via email.

“There will be some risk premium factored in as a default, until the market is satisfied that the event is not setting off a chain reaction and Mideast oil and gas supplies won’t be affected,” said Hari.

Militants from Hamas — designated by the U.S., European Union and the U.K. as a terrorist organization — infiltrated Israel by land, sea and air on Saturday, during a major Jewish holiday. The incursion came hours after the Islamist militants fired thousands of rockets into Israel from Gaza. 

Civilians including women, children and the elderly have been abducted, and others killed in their homes, Israeli Prime Minister Benjamin Netanyahu said.

Israel has begun the offensive phase, and will “continue with neither limitations nor respite until the objectives are achieved,” Netanyahu said.

He vowed to “exact an immense price from the enemy, within the Gaza Strip as well.” Late Saturday, Israel cut off the supply of electricity, fuel and goods to the narrow strip where 2.3 million Palestinians live.

At the time of publication, there were at least 250 Israelis killed and more than 1,860 injured, including 320 in serious condition, NBC News reported. The Palestinian Healthy Ministry recorded 256 deaths and 1,790 injuries in Gaza.

Both Israel and Palestine are not major oil players, but the conflict sits in a wider key oil producing region, analysts told CNBC, warning that it has the potential to conflagrate further.

Hari noted that while the conflict does not directly impact oil production or supply, it is still “on the doorstep of an important oil-producing and exporting region.”

Israel boasts two oil refineries with a combined capacity of almost 300,000 barrels per day. According to the U.S. Energy Information Administration (EIA), the country has “virtually no crude oil and condensate production.” The Palestinian territories produce no oil, data from EIA shows.

Hari’s sentiments were echoed by other market watchers.

“The impact on the oil price will be limited unless we see the ‘war’ between the two sides expand quickly to a regional war where the U.S. and Iran and other supporters of the parties get directly involved,” Middle East managing director of energy consultancy Facts Global Energy, Iman Nasseri, told CNBC.

Similarly, French businessman and hedge fund manager Pierre Andurand said that since the Levant is not a large oil producing region, the war is unlikely to impact oil supply in the short term. 

“One should not expect a large oil price spike in the coming days. But it could eventually have an impact on supply and prices,” he said in a post on X, the social media platform that was formerly Twitter.

Andurand said global oil inventories are low, and production cuts by OPEC kingpin Saudi Arabia, as well as Russia, will lead to more inventory draws over the next few months.

“The market will eventually have to beg for more Saudi supply, which I believe, will not happen sub $110 Brent.” 

Crude oil prices recently hit their highest level in more than a year before pulling back.

Still, Hari warned that the ongoing Israeli-Palestinian conflict “has the potential to widen into regional hostilities.”

On Sunday, Lebanon’s Hezbollah militant group confirmed it launched attacks on three sites in the Shebaa Farms — a strip of land that sits at the intersection of the Lebanese-Syrian border and the Golan Heights, which is occupied by Israel.

The Israeli Defense Force confirmed it has returned fire and “struck Hezbollah terrorist infrastructure.”

The world could face a shortage for lithium as demand for the metal ramps up, with some analysts forecasting that it could come as soon as 2025. Others, however, see a longer time frame before that shortfall hits.

BMI, a Fitch Solutions research unit, was among those that predict a lithium supply deficit by 2025. In a recently published report, BMI largely attributed the deficit to China’s lithium demand exceeding that of its supply.

“We expect an average of 20.4% year-on-year annual growth for China’s lithium demand for EVs alone over 2023-2032,” the report stated. 

In contrast, China’s lithium supply will only grow 6% over the same period, BMI said, adding that rate cannot satiate even one third of forecasted demand. 

China is the world’s third largest producer of lithium, which is an integral element in electric vehicle batteries. 

The world produced 540,000 metric tons of lithium in 2021, and by 2030 the World Economic Forum projects that global demand will reach over 3 million metric tons.

According to forecasts by S&P Global Commodity Insights, EV sales are set to reach 13.8 million in 2023, but will subsequently proceed to skyrocket to over 30 million by 2030.

“We do fundamentally believe in a shortage for the lithium industry. We forecast supply growth of course, but demand is set to grow at a much faster pace,” said Corinne Blanchard, Deutsche Bank’s director of lithium and clean tech equity research. 

By the end of 2025, Blanchard sees a “modest deficit” of around 40,000 to 60,000 tonnes of lithium carbonate equivalent, but forecasts a wider deficit amounting to 768,000 tonnes by the end of 2030.

Other analysts don’t see a deficit coming so soon, but still predicted a shortfall by the end of the decade.

While more lithium mines and mining exploration projects coming online could support burgeoning demand, that would only extend the runway for a few more years, according to Rystad Energy’s estimates.

According to the energy research firm, hundreds of lithium projects are currently under exploration, but the complexity in geology and time-consuming permitting process still pose challenges.

There are currently only 101 lithium mines in the world, according to Refinitiv data.

Rystad Energy Vice President Susan Zou estimates that total lithium mine supply will increase by 30% and 40% year on year in 2023 and 2024, and that miners would continue to develop both existing and greenfield projects amid a “global push to electrify transportations.”

While that could point to a global lithium surplus next year, shortages could start to plague supply chains in 2028. 

“In the next couple of years, though the lithium supply may stay adequate at a world-level, regional supply imbalance is still inevitable,” Zou added, noting regional mining and processing capacities in the U.S. and Europe might not be able to keep up with demand for EV batteries. 

“The global battery supply chain may find lithium in shortfall again approaching the end of this decade when the supply growth might not keep pace with that of the demand,” she said.

In that scenario, Zou said lithium prices could spike to their historic 2022 highs, which in turn would increase battery production costs. 

Lithium carbonate prices surged to a record high of almost 600,000 yuan per ton in November 2022, more than 12 times January 2021 prices.

Wood Mackenzie similarly forecasts that the overall lithium market will see a supply surplus in the coming years. However, continued demand growth and very few projects entering production in the early 2030s could mean the market is likely to experience another supply deficit, said the consultancy’s vice president of metals and mining research, Robin Griffin. 

“The main risks [are] likely to come from delays in commissioning of new projects and delays in permitting of new assets,” he said.

Lithium mines generally take “10 years or longer” from first discovery to full-fledged lithium operation, Piedmont Lithium’s chief commercial officer, Austin Devaney, told CNBC via e-mail.

“We believe there will eventually be enough lithium to support the demands of electrification. But in the near term, we expect to see the impact of supply constraints on lithium pricing for many years, if not longer,” he said.

Oil prices surged Monday to their highest since mid-April, following an attack on a key Russian oil export hub and extended production cuts by OPEC kingpin Saudi Arabia and Russia.

Over the weekend, Ukraine launched a naval drone attack on Russia’s port of Novorossiysk, a critical hub on the Black Sea for Russian oil exports. Ukraine did not immediately respond to CNBC’s request for comment.

In addition, the world’s top oil exporter Saudi Arabia last Thursday extended its voluntary crude oil output cut of a million barrels per day to the end of September. Saudi Arabia’s million barrel per day cut was implemented in July through to August, and the cut “can be extended or extended and deepened,” the state-owned Saudi Press Agency said last week.

“Now that we’ve seen supplies come off, I think I think we’ll see much higher prices,” said Josh Young, chief investment officer at Bison Interests, an oil and gas investment firm.

Russia, the world’s second largest oil exporter, also pledged Thursday to voluntarily trim oil exports by 300,000 million barrels per day in September.

Global benchmark Brent futures traded slightly below the flatline at $86.17 a barrel — the highest since April 14. U.S. West Texas Intermediate futures dipped 0.1% to $82.74 per barrel, hovering close to mid-April highs.

“I actually think they’re going to be quite volatile,” Young said, adding that prices will be much higher over the next five years.

“We might see all time-highs and prices crash as we go through this dynamic of insufficient supply relative to demand,” he said.

Citi’s Ed Morse was slightly more optimistic about crude oil supplies after September.

Morse, global head of commodity research at the bank, says Saudi Arabia and Russian output is “likely to come back” in October, and that oil prices will hit $90 per barrel at most this quarter.

“We just don’t see demand growth being that spectacular,” Morse said, projecting that there will not be “this huge incremental spurt in Chinese demand.”

Thailand, the world’s second largest exporter of rice, is encouraging its farmers to plant less of the crop in a bid to save water — a move that could roil rice markets further following India’s export ban.

Thailand is facing a spate of low rainfall. In an effort to conserve water for consumption, the Office of the National Water Resources (ONWR) has called on the country’s farmers to turn to “planting crops that use less water [which] can be harvested quickly.”

“The cumulative rainfall is about 40% less than normal, which is at high risk of water shortage,” secretary-general of the ONWR, Surasri Kidtimonton, said in a statement released by Thailand’s National Water Administration.

Kidtimonton said the country’s water management needs to “focus on water for consumption,” as well as “water for cultivation mainly for perennial crops.”

Perennial crops are crops that grow back after harvest and need not be replanted every year, unlike annual crops. Rice is categorized as an annual crop.

For every kilogram of rough rice grown, an average of 2,500 liters of water is needed. In comparison, alternative crops like millets require between 650 to 1,200 liters of water for the same amount harvested.

Just last month, India banned exports of non-basmati white rice, a move aimed at ensuring “adequate availability” in domestic markets, the government said.

India is the world’s leading rice exporter and accounts for 40% of global rice trade, and the ban is expected to affect millions.

“Global rice price will have the potential to increase further in the event that rice production in Thailand decreases significantly year on year,” Rabobank’s senior analyst Oscar Tjakra told CNBC.

However, it still remains to be seen whether Thai farmers will follow the directive, said Tjakra.

“Thai farmers might still choose to plant rice on the back of the current high global rice export prices environment,” he said.

Rice prices are already hovering at decade highs, in part due to tighter supplies when the staple became an attractive alternative as prices of other major grains surged following Russia’s invasion of Ukraine in February 2022.

“Thailand often pushes for water conservation, but it has little effect on the use of water as the water rights system has yet to be developed,” said Jeremy Zwinger, CEO of The Rice Trader told CNBC in an e-mail.

Extreme weather conditions brought on by an approaching El Nino are fueling concerns that robusta beans in major coffee producers like Vietnam and Indonesia could be hit, resulting in soaring prices.

“The now widely-expected transition to El Nino conditions in Q323 has stoked fears of reduced output in Vietnam and Indonesia, both major coffee robusta producers,” Fitch Solutions’ research unit BMI said in report dated May 24.

Robusta beans are known for their bitter characteristics and higher acidity, containing more caffeine than their premium and pricier arabica counterpart.

Brazil’s robusta crop has also been negatively impacted by drought as well, the report said.

That means the cost of instant coffee and espressos, which are often made with robusta beans, could come under pressure amid supply worries and a stronger than usual demand for robusta as consumers turn to cheaper substitutes for arabica.

El Nino is a weather phenomenon that typically brings hotter and drier than usual conditions to the central and eastern tropical Pacific Ocean. Climate scientists are predicting that this year’s El Nino could descend in the second half of 2023. 

Southeast Asia recently saw record-breaking heat in the middle of May.

“Across Southeast Asia, El Niño conditions are associated with below-average rainfall and higher temperatures, both of which depress coffee production,” the BMI report said.

Vietnam, Indonesia and Brazil are the largest producers of robusta, according to the Food and Agriculture Organization.

“We draw attention to heavy rains in Indonesia through Q123, which have had a negative impact on coffee bean quality, with the USDA forecasting a decline of about one fifth in coffee robusta production,” the analysts said.

Carlos Mera, head of agri commodities markets at Rabobank, is forecasting a 10% drop in production to 11.2 million bags of robusta in the coming crop harvest.

In 2016, El Nino-related water shortages in both Vietnam and Indonesia led to a global production decline of close to 10%, according to the research unit’s statistics.

Typically, in an El Nino year, it is “not uncommon” for Vietnam and Indonesia to “see a 20% decline in production” in robusta beans, Shawn Hackett, president of commodity brokerage firm Hackett Financial Advisors, told CNBC.

“That would mean a pretty severe contraction of robusta,” he said.

Robusta beans account for 40% of the world’s coffee production, and arabica beans make up the remaining 60% of global coffee production. Arabica beans are usually deemed to be of higher quality and command higher prices than robusta coffee.

However, global economic pressures are tipping demand toward robusta, the underdog of coffee beans.

Robusta prices are supported as coffee-product manufacturers and consumers substitute robusta beans for pricier arabica beans to save costs during inflationary times, the BMI report said.

Robusta coffee prices recently soared to a 15-year high of $2,783 per ton toward the end of May. They last traded at $2,608 per ton for July futures, according to data from the Intercontinental Exchange.

Additionally, the premium that arabica beans have over robusta beans plunged to the lowest since 2019 due to soaring demand for the relatively cheaper coffee bean.

“Asia, generally speaking, has taken a liking to robusta more so than arabica, and as such the demand for robusta is growing at a much faster rate than demand for arabica,” said Hackett.

He cited the lower price point of robusta beans in Asia and the population’s palette for robusta-bean based drinks. 

Kopi, also known as Nanyang coffee, is a dark coffee beverage popular in Southeast Asia that’s traditionally brewed using robusta beans.

But Asia is not the only region that has taken an increased liking to robusta.

“While the reduction in washed arabica imports is partially due to lower availability … the shift to robusta shows that cheaper coffees are being heavily preferred by the European market,” said Natalia Gandolphi, analyst at HedgePoint Global Markets’ Intelligence.

Gandolphi said she expects a deficit of 4.16 million bags of robusta for the October 2023 to September 2024 period.