Oil prices rose sharply on Tuesday as investors became concerned about potential global supply disruptions after more attacks on Saudi Arabia’s energy infrastructure. Brent crude futures were up 1.18% at $106.93 a barrel, and U.S. West Texas Intermediate futures were up 1.24% at $102.65 a barrel. The U.S. Energy Information Administration is keeping a close eye on these market swings, as traders assess the potential for a wider Middle East conflict to significantly cut off access to oil supplies.
The price rally follows the devastating missile and drone strike on Khamis Mushait military airbase in southern Saudi Arabia by Iran-backed Houthis. Coordinated emergency actions conducted under the supervision of the Saudi Ministry of Defense reported that the retaliatory attacks targeted aircraft hangars, radar stations, runways and ammunition depots. Member countries of the Gulf Cooperation Council (GCC) also delayed scheduled diplomatic talks with Iran in an effort to defuse rising tensions in the region, further reducing optimism for a quick de-escalation.
The strikes on the military base came after another successful attack late last Friday to the vital East-West pipeline in Saudi Arabia. Riyadh accused Iranian-backed Iraqi insurgents of the sabotage. It is vital for the world’s biggest oil exporter and will let it divert about 4 million barrels per day from its current route to the Red Sea port of Yanbu, about 4% of the world’s supply. Buyers and traders caution that if things are not resolved within days, Saudi Arabia may be forced to tap into its export bank to boost prices in the market.
The heavily disputed Strait of Hormuz has also seen a drop in commercial maritime traffic. The region on Saturday also saw fewer than 10 vessels pass a day, from an average of 14, which aligns with the International Maritime Organization’s tracking standards. Before the U.S.-Israeli war on Iran broke out in late February, this key chokepoint controlled about one-fifth of all the world’s oil supplies.
In another geopolitical move that could have global energy market consequences, the Ukrainian President, Volodymyr Zelensky, said Kyiv is ready to back a U.S. plan for a localized ceasefire on energy facilities. But Zelenskyy said that he’d be willing to make this deal only if Washington will put pressure on Moscow and make sure it is serious about ending its ongoing war against Ukraine.
