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Oil peaks in seven years as Houthi attacks on the UAE rattle regional tensions

A storage facility for the oil giant ADNOC near the airport in the capital of the United Arab Emirates, Abu Dhabi, on January 17, 2022.

AFP | Getty Images

DUBAI, United Arab Emirates - The United Arab Emirates has vowed to retaliate against Houthi militants for a deadly attack on its capital Abu Dhabi on Monday that killed three people as new tensions in the region helped push oil prices to their highest level in seven years.

"We condemn the Houthi militia's targeting of civilian areas and facilities on UAE land today," the UAE State Department said in a statement following the attacks. "We reiterate that those responsible for this illegal targeting of our country will be held accountable."

The ministry added that the UAE "reserves the right to respond to these terrorist attacks and criminal escalation."

International benchmark Brent crude oil futures rose 1.6% to $ 87.89 per share. barrel Tuesday morning, while US West Texas Intermediate futures jumped more than 2% to $ 85.56 during early morning trading. Both oil contracts reached their highest level since October 2014 after a subdued trading day on Monday, when US markets were closed for a public holiday.

Energy analysts have attributed the oil's bullish run in recent weeks to signs of market tightness and persistent concerns about a Russian intrusion into Ukraine. The growing threat of a further deterioration of the Middle East's security climate has provided further support for oil prices, prompting some to predict a return to the triple digits.

The most significant attack on the UAE

Yemeni Houthi insurgents claimed responsibility for the attack, which took place Monday morning, causing fires that resulted in three oil tanker explosions near state-owned oil company ADNOC's storage facilities. The fires started in the Musaffah industrial area and at a construction site near Abu Dhabi International Airport in the UAE capital, Abu Dhabi police said in a statement, adding that they believe the attack was carried out by drones.

One Pakistani and two Indian nationals died as a result of the attacks. Six other people were injured and are being treated for mild to moderate injuries, authorities said Monday.

Attacks by Houthi rebels - which the UAE has been at war with in Yemen since a Saudi-led coalition began bombing the country in 2015 - have been common in Saudi Arabia, but this is the most significant attack by the Houthis in the UAE, and is the first in the country since 2018.

The UAE largely withdrew from the Yemen conflict in 2019, but continues to support forces in the country fighting the Houthis, who receive economic and military backing from Iran.

The UAE is the third largest oil-producing member of OPEC, and ADNOC - Abu Dhabi National Oil Company - controls the oil activities in Abu Dhabi, home to the vast majority of the state's crude oil. The United Arab Emirates is the world's seventh largest oil producer and pumps just over 4 million barrels a day.

- CNBC's Sam Meredith contributed to this report

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