Business
Oil prices steady despite Middle East tensions, but risks are rising
In recent weeks, missile and drone attacks on cargo ships crossing the Red Sea have caused the biggest disruption to global trade since the COVID-19 pandemic. Despite delayed supplies, however, oil prices have remained surprisingly stable.
In response to Israel’s war on Gaza, Houthi rebels – the Iran-aligned Shia movement that controls northern Yemen and its western coastline – have launched a wave of assaults on ships in the Red Sea. By targeting vessels with perceived links to Israel, they are attempting to force Tel Aviv to stop the war and admit full humanitarian aid into Gaza. Houthis have launched at least 26 separate attacks since November 19 on merchant freighters.
Though no ships have yet been sunk, the United States recently dispatched a multinational naval task force to the region. On December 31, American Navy helicopters killed 10 Houthi fighters and sank three of the group’s speedboats.
The following day, Iran dispatched its Alborz warship to the Red Sea, compounding an already volatile situation. The government did not provide information on the vessel’s mission.
On Wednesday, Houthi rebels fired their largest barrage of projectiles yet, forcing an engagement with US and British naval forces. On Thursday night, the US and UK led a bombing campaign against multiple Houthi facilities in Yemen.
While Brent crude briefly topped $80 per barrel after Thursday’s air strikes, oil prices have mostly trended sideways in recent weeks. Market fundamentals suggest a balanced, or slightly surplus, market. And until there is a clear threat to global supply, traders appear to have relegated tensions in the Middle East to background noise.
Houthi activity has so far been concentrated in the narrow strait of Bab al-Mandab, which connects the Gulf of Aden to the Red Sea. Approximately 50 ships sail through the strait every day, heading to and from the Suez Canal – a central artery for global trade.
Some of the world’s largest shipping companies have suspended transit in the region, forcing vessels to sail around the Cape of Good Hope in Southern Africa. The lengthier route has raised freight rates due to higher fuel, crew and insurance costs.
According to Clarksons, a shipbroker, roughly 24,000 vessels crossed the Suez Canal last year. That amounts to one-tenth of global trade, including 10 percent of seaborne oil and 8 percent of liquefied natural gas.
Ships travelling through the Suez Canal have taken on greater strategic significance since the war in Ukraine, as Russian sanctions have made Europe more dependent on oil from the Middle East, which supplies one-third of the world’s Brent crude, the international benchmark.
“The region is an important channel for freight, representing almost one-third of global container capacity. As such, Houthi-linked bottlenecks pose a new risk to inflation,” said Rahul Sharan, a senior manager for maritime consultancy Drewry.
“We’ve seen hundreds of vessels rerouted from the Suez Canal in recent months. We don’t yet have visibility on which industries have been most severely affected, but consumer goods costs could rise if oil and gas prices increase.”
Despite diverting supplies from the Suez Canal, tensions in the Red Sea have so far had a muted impact on energy prices. “We’ve seen plenty of volatility, so geopolitical risks are being considered. But not enough to lift prices,” says energy trader Mohammed Yagoub.
“The truth is that headline fatigue has set in. There’s been a lot of coverage on tensions in the Red Sea, especially today. But global supplies have remained broadly steady in recent weeks,” Yagoub told Al Jazeera.
“You have to remember that the oil can still travel around Africa, as well as from ports in western Saudi Arabia, bypassing the need to cross Bab al-Mandeb.” The Houthis, he said, were also unlikely to attack ships from friendly oil and gas-producing countries in the region.
There are other factors at play – recent record US production, the lifting of oil sanctions in Venezuela and tepid global demand, Yagoub added.
However, looking ahead, he warned that “tensions in Iran, especially around Hormuz, could move the needle on prices.”
Approximately 17 million barrels of crude oil, nearly one-sixth of global supply, are transported on a daily basis through the Strait of Hormuz, between the Arabian Gulf and the Gulf of Oman. If Iran became actively engaged in the conflict, Tehran could threaten to close this vital channel.
Any such closure could see crude prices surge by 20 percent in a month and higher thereafter, according to Callum Bruce, an analyst at Goldman Sachs. “It would be a huge, huge shock. For now, though, the implied market probability of that happening is less than 1 percent,” he said. Tehran has appeared reluctant to engage in military conflict with the US military and its economy remains fragile.
Bruce pointed out that “oil traders will continue paying close attention to activity in the Middle East. Gaza is ground zero. Then, you have the Red Sea. Tensions across the region have also ratcheted up in recent weeks.”
On January 2, senior Hamas leader Saleh al-Arouri was killed in Beirut by an Israeli drone raid following three months of hostilities at the Lebanon-Israel border. It was the first air raid on Beirut since 2006.
This past week, Israel assassinated a Hezbollah commander in south Lebanon, while Hezbollah, which has Iranian support, struck a sensitive Israeli base with rockets. Meanwhile, Iran-backed groups in Iraq have stepped up attacks on US military bases.
For his part, US President Joe Biden has said he is keen to prevent the war on Gaza from spiralling into an all-out regional conflagration, though the bombing of Yemen has been viewed by the Houthis as an escalation. On Sunday, US Secretary of State Anthony Blinken was dispatched to the Middle East on a diplomatic trip for the fourth time in three months.
“Israel’s war with Hamas seems to have energised already existing tensions,” said Bruce. “And while US naval activity in the Red Sea provoked headlines, economic essentials are continuing to dictate oil prices.”
Mohammed Yagoub added, “It’s true that mega-trends are pre-occupying traders. But the likelihood of a regional conflict will increase the longer the fighting in Gaza persists. Yemen is proving that. So, you could make the case that oil traders are too sanguine right now.”
(Aljazeera)
National Development Bank PLC (NDB) conducted its Investor and Analysts Earnings Call on 12th of March, following the release of the financial results and annual report for the full year ended December 31, 2024.
The session, led by Kelum Edirisinghe, Director and Chief Executive Officer of NDB Bank, along with the bank’s senior management team, was held virtually via Zoom. During the call, the CEO delivered a comprehensive presentation on the bank’s financial performance for FY 2024, its strategic direction, and key operational highlights. This was followed by an interactive Q&A session, providing investors and analysts with valuable insights into the bank’s growth trajectory and future outlook.
The forum attracted a diverse group of stakeholders, including research analysts, stockbrokers, fund managers, and investors. Organized by NDB’s Investor Relations Team, the session reinforced the bank’s commitment to transparency and stakeholder engagement. Since 2014, NDB has consistently hosted these quarterly and annual earnings calls, demonstrating a longstanding commitment to fostering trust and accountability. Transcripts and recordings of the call will be made available on the bank’s website, ensuring continued access to key insights.
During the presentation, the CEO highlighted NDB’s strong financial performance in 2024, underpinned by strategic initiatives aimed at optimizing the cost of funds, strengthening portfolio quality, and driving sustainable profitability. The bank’s digital transformation efforts, coupled with a focus on enhancing transactional and fee-based income, played a pivotal role in navigating macroeconomic challenges and positioning NDB for long-term growth. The Q&A session that followed saw insightful discussions on key topics, including the bank’s loan portfolio quality, CASA base, projected loan growth, sources for loan growth, and expectations on interest rate movements in the economy.
Despite the dynamic economic landscape, NDB remained resilient, leveraging its robust risk management framework and customer-centric approach to maintain stability and deliver value to stakeholders.
The Commercial Bank of Ceylon has been voted the ‘People’s Private Banking Services Brand of the Year’ for the third consecutive year at the SLIM Kantar People’s Awards 2025, in a significant validation of the Bank’s status as the most popular private sector bank in the country.
Presented by the Sri Lanka Institute of Marketing (SLIM) and based on research by Kantar, a leading global insights agency, these awards are considered the ultimate testament to consumer-driven recognition in Sri Lanka. They are determined solely by consumer votes rather than a panel of experts, and recognise the brands and personalities that have earned the trust and loyalty of Sri Lankans.
The Bank said this accolade is a testament to the continuing impact of its services in the lives of millions of people, as well as the effectiveness of the Bank’s brand-building efforts and marketing initiatives. The Bank’s continuous engagement with customers, innovative campaigns, and commitment to delivering superior banking experiences have been instrumental in securing this recognition.
During the Eng. (Prof.) R. H. Paul Memorial Oration 2025, Prof. Lilantha Samaranayake emphasised the urgent need for advanced solar photovoltaic (PV) integration to create a resilient and sustainable energy future. Speaking on the Future of Renewable Energy, he highlighted projections from the International Energy Agency (IEA) that forecast global renewable electricity generation will exceed 17,000 TWh by 2030, representing an almost 90% increase from 2023. Solar PV is anticipated to become the leading source of renewable electricity, followed by wind and hydroelectric power.
Sri Lanka has set an ambitious target of achieving 100% renewable energy. Policymakers are working towards a people-centric, equitable, and affordable energy transition. The government also aims to reduce electricity tariffs by 30% within five years, though no specific timeline has been set for net-zero emissions.
Challenges in Solar PV Integration—While renewable energy adoption is increasing, challenges remain. A major issue is grid stability due to solar energy’s intermittent nature. Grid stability refers to the ability of an electrical power grid to maintain a consistent voltage and frequency while balancing electricity supply and demand. One of the main challenges with integrating solar energy into the grid is its intermittent nature, meaning that solar power generation fluctuates depending on sunlight availability. This variability can cause instability in the grid.
Why is Solar Energy Intermittent? Solar panels generate electricity only when exposed to sunlight. At night, there is no generation, requiring alternative power sources. Cloud cover, rain, and seasonal changes affect solar energy output. On cloudy days, solar generation can drop suddenly, causing fluctuations in power supply. Unlike conventional power plants that provide a steady output, solar energy can vary within minutes, making it challenging to maintain a stable power flow.
How Does This Affect Grid Stability? The Electricity grids operate at a specific frequency (e.g., 50 Hz or 60 Hz). A sudden drop in solar power generation can lead to a decrease in frequency, potentially causing power outages. Solar energy injections can cause voltage levels to rise or drop unpredictably, affecting equipment performance and consumer supply quality. Traditional power plants have rotating generators that provide inertia, helping to stabilise the grid. Solar PV systems do not have this natural inertia, making the grid more susceptible to instability.
Prof. Samaranayake explained that Sri Lanka’s current power generation mix, as of November 2024, includes:
27% from hydroelectric power
19.6% from rooftop solar
14.3% from coal
13.6% from oil
5.1% from private oil plants
Smaller contributions from wind, biomass, and other renewable sources
A key concern is the lack of inertia in renewable energy sources. Unlike conventional power plants, solar and wind do not provide inherent grid stability, leading to frequency fluctuations.
Prof. Samaranayake proposed an innovative solution for grid stability: implementing Virtual Inertia using advanced power electronic control systems. This approach mimics the stabilising effect of traditional rotating generators, ensuring a steady frequency supply in the grid.
Other potential solutions include:
Adding rotating machines such as LNG or nuclear power plants
Energy storage systems like pumped storage, flywheels, and large-scale battery systems
Enhancing grid regulations to support the integration of rooftop solar PV systems
The introduction of advanced Virtual Inertia technology is expected to complement regulatory changes that relax statutory voltage limits and improve the quality of electricity supply.
Another controversial yet forward-looking strategy discussed was the possibility of nuclear energy. According to sources from the Sri Lanka Atomic Energy Board (SLAEB), the country’s first nuclear power plant, leveraging integral pressurized water reactor (iPWR) technology, could be operational by 2032. Given Sri Lanka’s proximity to India, which already operates nuclear plants, proponents argue that nuclear energy could be a viable option for stabilizing the power grid.
Prof. Samaranayake stressed the need for a holistic approach, as solar PV continues to be vital to Sri Lanka’s energy future. This involves investing in energy storage, enhancing grid infrastructure, and enacting regulatory reforms. He called on policymakers, engineers, and the public to collaborate in creating a more sustainable and resilient energy landscape.
The Eng. (Prof.) R. H. Paul Memorial Oration reminds us of engineering and innovation’s critical role in tackling global energy challenges. With strategic planning and technological advancements, Sri Lanka can pave the way for a cleaner, more sustainable future.
The oration paid tribute to the late Prof. R. H. Paul, a distinguished academic and former Dean of the Faculty of Engineering, University of Peradeniya, who made significant contributions to electrical and electronic engineering in Sri Lanka. His legacy continues to inspire advancements in the energy sector.
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