Oil Prices Rise as Saudi Pipeline Shutdown and Regional Attacks Deepen Supply Fears

Crude oil prices extended gains on Tuesday as the shutdown of Saudi Arabia's critical East-West pipeline and a series of fresh attacks on regional energy infrastructure heightened fears of a sustained global supply shock. Brent crude futures climbed to $107.55 a barrel, while U.S. West Texas Intermediate futures rose to $103.53, reflecting market anxiety over the security of energy transport routes in the Middle East.

The East-West pipeline, a vital artery that allows Saudi Arabia to bypass the Strait of Hormuz for its Red Sea exports, remains offline following an attack on September 11. Market participants and traders have warned that the kingdom could exhaust its available export capacity within days if operations are not restored. Goldman Sachs noted that repair assessments for the facility vary significantly, ranging from an immediate resumption to an eight-week outage. The disruption threatens up to 4 percent of global oil supply, adding a substantial geopolitical premium to current pricing.

Supply concerns were further compounded by fresh military activity on Monday, when Iran-backed Houthi forces in Yemen launched a coordinated missile and drone strike against a military airbase in Khamis Mushait, Saudi Arabia. The attack targeted critical infrastructure, including radar systems and ammunition depots. Simultaneously, Gulf Arab states have postponed planned diplomatic discussions with Iran, signaling a potential stall in efforts to de-escalate regional tensions. Data from Kpler indicated that commodity vessel traffic through the Strait of Hormuz dropped to four on Monday, down from a daily average of 10, underscoring the heightened risk to maritime energy corridors.

Beyond the Middle East, energy markets are grappling with supply constraints elsewhere, as half of Russia's top diesel-producing refineries have been forced to cut or halt output following recent drone strikes. For major oil-importing economies like India, the sustained price surge above $100 a barrel presents significant risks, including potential pressure on the rupee, increased transportation costs, and broader inflationary challenges. Analysts suggest that in the absence of increased oil flows or a significant demand adjustment, a prolonged closure of the East-West pipeline could push Brent crude prices toward $130 per barrel.