Saudi Arabia closed its East-West crude pipeline on Monday after a series of drone attacks, and Brent crude climbed to as much as $108.03 a barrel. The move hit a key export route at the same time traders were watching shipping risks around Bab al-Mandab strait and Hormuz.
Brent rose 3.25% on the day. Gas prices also moved higher, rising 5% to 208.73p a therm, their highest level since December 2022.
Chris Beauchamp and IG
Chris Beauchamp, a broker at IG, said a move back to the spring highs looked increasingly likely. He said, "Oil markets are being subjected to their worst fears all at once – attacks on energy infrastructure, the closure of Hormuz and a breakdown in attempts to restart negotiations".
He added, "The risk of further disruption is also spreading beyond the Gulf, with the threat of renewed Houthi attacks on shipping adding another layer of uncertainty around key energy and trade routes." He also said, "The major surprise is how calm markets remain in the face of all this, but if prices breach the March highs, things could get ugly very quickly."
Yemen, Perim and Hormuz
On Sunday, Yemen’s Iran-aligned Houthi forces captured the strategic island of Perim in the Bab al-Mandab strait. The Gulf states postponed a meeting with Tehran to discuss creating a temporary shipping lane through the strait of Hormuz.
Traders in the kingdom warned it would run out of oil stocks for export if it did not reopen the East-West pipeline within days. That leaves Saudi Arabia facing pressure on exports while Brent trades above $108 and the market weighs further disruption beyond the Gulf.
Riyadh recently told Opec that its crude production in August was at its lowest level since 1990, according to, and oil prices had already risen above $100 a barrel for the first time since July last week. The question now is whether Saudi Arabia can restore the pipeline quickly enough to avoid a deeper squeeze on export supply.
