A big rally in crude oil that has seen WTI regain $50 and Brent take a run at $60 has dominated trading in North America and Europe today. The rally has been sparked by increased instability in the Middle East after Saudi Arabia launched air strikes against rebel forces in Yemen and reports swirled that Saudi Arabia and Egypt are preparing to send in ground troops. Although Yemen does produce some oil, its main impact on energy is that it sits astride the straits that join the Red Sea/Suez Canal with the Arabian Sea/Indian, an important energy trade route. Recall the piracy in the Indian Ocean from countries like Somalia has been targeting freighters heading toward these straits. So in this case any supply disruptions could be related more to transport than production. The initial reaction to today’s escalation has been for both WTI and Brent crude to soar nearly 5%.. It’s important for traders to remember that war related spikes in oil can be short lived and prices may subside again if the conflict becomes contained. Middle East instability, meanwhile, keeps the pressure on the US to keep growing domestic production to lessen the country’s exposure to politically riskier energy sources. Because of this, in the coming days we could see the Brent to WTI spread widen out again. Political instability also initially sparked big flows of capital out of stocks and other risk assets into defensive havens like gold, JPY, USD and CHF although some of these have been unwound as the day progressed as gold finished back near $1,200. The Dow crept back into the green by mid-afternoon but was unable to stay above water and finished down moderately. . CAD in particular has benefitted from higher oil prices today. On the other hand, natural gas has gone against the energy grain and dropped 2%. The first storage build of the year reminded traders that home heating season is over. Today’s Asia Pacific trading may continue to be impacted by the changing situation in Yemen, particularly with the weekend approaching. JPY pairs and the Nikkei may also attract attention today as a number of key Japanese indicators may indicate if the Bank of Japan may need to increase stimulus, decrease stimulus or stay the course in the coming weeks and months. Corporate News There have been no major developments following the US close today. Economic News Significant announcements released overnight include: US jobless claims 282K vs street 290K US natural gas storage 12 BCF vs street 8 and previous (45) UK retail sales 5.7% vs street 4.7% UK retail ex auto 5.1% vs street 4.2% Upcoming significant announcements include: 10:30 am AEDT Japan unemployment rate street 3.5% 10:30 am AEDT Japan consumer prices street 2.3% 10:50 am AEDT Japan retail sales street (1.5%) 12:30 pm AEDT China industrial profits previous (8.0%) 7:00 am GMT UK Nationwide house prices street 5.3% 8:30 am GMT Sweden retail sales street 3.6% 9:00 am GMT Norway retail sales street 0.5% 9:00 am GMT Norway unemployment rate street 3.0% 10:00 am GMT Italy retail sales street (0.3%) 8:00 am EDT Brazil GDP street (0.7%) 8:30 am EDT US Q4 GDP update street 2.4% vs previous 2.2% 8:30 am EDT US Q4 personal consumption street 4.4% 8:30 am EDT US Q4 Core PCE inflation street 1.1% 10:00 am EDT US consumer sentiment street 92.0 1:00 pm EDT US Baker Hughes rig count previous 1,069 3:45 pm EDT US FOMC Chair Yellen speaking