Crude oil prices rose as much as 6 percent on Thursday after Saudi Arabia and its allies launched air strikes on Yemen, raising also gold prices more than 1 percent to $1,211.20 an ounce. The US dollar weakened, losing 0.8 percent against Japan's yen, which stood at 118.51 to the dollar. It, however, strengthened against the Turkish lira, with the USD/TRY exchange rate hitting 2.61, its highest level in one week.
The military operations, including air strikes, targeted Iran-backed Houthi rebels besieging the southern Yemen city of Aden. Arab producers ship oil via the Gulf of Aden and Suez Canal to Europe.
The escalating tensions in the Middle East pushed the price of Brent crude up more than $3 a barrel to close to $60, a 2 1/2-week high. It last traded at $59.17, up 4.7 percent.
"Oil is having a nice move after more geopolitical tensions in the Middle East over Yemen. Saudi has intervened via a military operation but, to be clear, (it) has at the moment led to no disruptions in oil supply," said Atif Latif, director of trading at Guardian Stockbrokers in London.
A vertiginous slide in oil prices, from more than $115 a barrel last June to a low of $45 in January, has been a major driver of financial markets in the past year and a key factor driving monetary policy.
The fall has cut living costs for consumers across the globe but has triggered fears of growth-sapping deflation. More than two dozen central banks have eased policy, driving yields on many low-risk bonds into negative territory.
"We have been talking about it being the beginning of the end and that's still the way I would characterise it," said Daragh Maher, currency strategist with HSBC in London.
"What it will have done, I think, is raised some doubts in people's minds that the bull run is not without end."
"The impact of Saudi Arabia's air strikes in Yemen is complex," said Mizuho strategist Peter Chatwell.
"It's geopolitical risk, so Bund bullish, but the rise in the oil price should push expectations of headline inflation higher over the coming months."
