Oil prices jumped on Thursday and settled up by $3 a barrel after attacks on Saudi energy infrastructure escalated and shipping disruptions through the Strait of Hormuz threatened global oil flows. Brent futures settled at $95.82 a barrel, up $3.06 or 3.3 per cent, while United States West Texas Intermediate crude closed at $88.74 a barrel, up $2.21 or 2.6 per cent.
Trade was volatile, with crude selling off early and then rebounding after Yemen's Iran-aligned Houthis said they had attacked a pumping station on the Saudi East-West oil pipeline, an oil facility in the Saudi Red Sea city of Yanbu, and an Aramco building in the capital, Riyadh. The Saudi-led military coalition fighting the Houthis said it had intercepted and destroyed two drones launched by the group, one in the Riyadh region and another in the kingdom's oil-rich Eastern Province.
In the Gulf, the situation on the water was grave. Iran's military said four oil tankers were hit by explosions in the Strait of Hormuz after ignoring warnings, and reports from the region described tankers still ablaze, oil spills washing ashore, and drones and missiles hitting infrastructure across the region. The Strait of Hormuz carried nearly one-fifth of the world's crude oil before the United States-Israeli conflict with Iran, making any disruption there a matter of global concern.
The escalation follows weeks of mounting attacks on shipping in the Middle East. Ten attacks on vessels in the Strait of Hormuz and surrounding waterways had been recorded so far in November, compared with 37 in October, according to Reuters, and the attacks have intensified even as traders had begun to price in de-escalation after the American midterm elections.
The Houthis had already claimed fresh strikes earlier in the week, including on Riyadh airport, pumping stations along the East-West pipeline, an Aramco facility in Abqaiq and military posts in Yemen. The Saudi energy ministry confirmed that an attack on the East-West pipeline in the Medina region on 9 November caused a limited fire, and Saudi Arabia's main stock index fell 0.78 per cent on Sunday as the attacks mounted.
The most serious single incident so far came on 8 November, when a Houthi missile and drone attack struck Riyadh and debris from intercepted missiles damaged an Aramco administrative building in the capital's King Abdullah Financial District. The Saudi energy ministry said there were no injuries or deaths, and coalition forces said their defences had intercepted the missiles.
For all the alarm, the market's weekly picture remained mixed. For the week, both Brent and WTI were still down about 2.5 per cent, after crude had fallen sharply the previous week as traders unwound the war-risk premium on bets that the Democratic midterm sweep would force the Trump administration towards a peace deal with Iran. The events of the past few days have challenged that bet directly.
Aramco has been pumping about four million barrels per day of exports through the East-West pipeline in recent months to replace volumes unable to exit the Strait of Hormuz, and a campaign that names the pipeline tests the assumption that Saudi crude can be rerouted around the strait. Aramco chief executive Amin Nasser has said rebuilding inventories while meeting demand could take up to two years, and that pressure would intensify across the energy chain until the Strait of Hormuz was fully reopened.
Traders will now watch for any United States response, any further Saudi or Aramco statement on the pipeline and the pumping station, and the OPEC+ meeting on 29 November. The United States has ruled out further strikes against Iran, but the attacks on Saudi infrastructure and on tankers in the strait have put the region's energy security back at the centre of the market's attention.
For consumers, the immediate consequence is higher fuel costs: a $3 rise in crude typically feeds through to petrol and diesel prices within days. For the wider world, the episode is a reminder that the conflict in the Gulf, which many had hoped was easing, still has the capacity to disrupt the energy supplies on which the global economy depends.
