Global oil prices rose by more than 3% in early Asian trading on Monday as investors reassessed supply risks from the Middle East. By the time of publication, gains had eased slightly, but both main benchmarks remained higher: WTI futures were trading at $102.2 per barrel, up 2.16% on the day, while Brent stood at $106.8, up 2.14%.
One of the market’s main concerns remains the shutdown of Saudi Arabia’s East-West Pipeline. The pipeline was hit by drone attacks last week and has yet to resume operations. Traders estimate that if throughput is not restored within days, export flows equivalent to roughly 4% of global oil supply could be at risk. The full extent of the damage is still unclear, though reports said several pumping stations were struck by drones launched from Iraq.
Over the weekend, the Houthis said they had carried out a large-scale missile and drone attack on Saudi Arabia, claiming they hit a military base in Sharurah. Saudi state media did not confirm that strike, but separately reported that a projectile landed in the Jazan region. Markets viewed the episode as a further escalation in the confrontation between Saudi Arabia and Iranian proxies.
Tensions were compounded by an alert from the UKMTO, which said a vessel in the Strait of Hormuz had been struck by an unknown projectile. AP later reported that an Iranian cargo vessel was hit early on Sunday off Qeshm Island, although it remains unclear whether the two reports refer to the same incident.
Oil’s bullish tone was also reinforced by a diplomatic setback. Oman’s Foreign Minister, Badr Albusaidi, said a Monday meeting between Gulf states and Iran had been postponed because there was no consensus. The talks were meant to address a possible arrangement between Iran and Oman over the temporary management of shipping through the Strait of Hormuz. It would have been the first group meeting between senior GCC diplomats and their Iranian counterparts since the war began.
Supply risks are not limited to the East-West Pipeline. Last week, the Houthis made gains in Yemen and expanded their control toward the Bab el-Mandeb Strait. Of particular importance, the group reached the strategically significant island of Perim, potentially giving it the ability to monitor traffic and, if necessary, mine the Red Sea waterway.
For the oil market, the combination of ongoing attacks, stalled diplomacy and uncertainty over how much supply will leave the region in the coming weeks remains a strong bullish driver. If Saudi Arabia quickly restores throughput on the East-West Pipeline and the Gulf states-Iran meeting is rescheduled, some pressure could ease. Until then, however, traders are likely to continue pricing in further upside for crude.
