Oil prices have surged to multi-week highs following recent attacks by Iran-backed Houthi forces on Saudi energy facilities. Brent crude futures were up by $1.63, or 1.68%, reaching $98.63 a barrel. U.S. West Texas Intermediate (WTI) also saw significant increases, with some reports indicating WTI near $104 and Brent above $107 after easing slightly on the day. The spike is primarily attributed to drone attacks that forced Saudi Arabia to close its east-west crude pipeline, a critical artery that carries crude across the kingdom to the Red Sea, bypassing the Strait of Hormuz.
The East-West pipeline, which has a capacity of 7 million barrels per day and accounts for about 4% of global oil supply, has been offline since a drone attack on September 10. This disruption, combined with Houthi forces capturing the strategic island of Perim in the Bab al-Mandab strait and tightening their grip on the Red Sea, has created a significant supply shock. Market concerns were further fueled by Gulf states postponing a meeting with Tehran to discuss creating a temporary shipping lane through the Strait of Hormuz, a vital channel through which a fifth of the world's oil and gas supply normally passes.
European buyers pushed some physical oil cargo prices above $130 a barrel on September 15, while Brent and US crude futures reached their highest settlements since May 19. Brent crude futures settled $3.07, or 2.9%, higher at $108.75, and WTI gained $4.44, or 4.38%, to $105.83 a barrel. Traders in Saudi Arabia have warned that the kingdom could run out of oil stocks for export within days if the East-West pipeline does not reopen. Goldman Sachs has raised its December 2026 Brent view to $85 and WTI outlook to $80, and suggests that further attacks could push Brent above $120 a barrel, particularly if Gulf oil output remains 4 million barrels per day below pre-war levels in 2027.
The oil price surge has also impacted gas prices, with the UK benchmark rising by 5%. The commodity's significant climb, with WTI up about 22% this month and roughly 45% this year, has put a Federal Reserve rate hike on the table. Markets are now placing the odds of a quarter-point increase at Wednesday's FOMC meeting at 92.7%. The energy shock is directly feeding into inflation concerns, making it a critical factor in the Fed's decision-making process. US Energy Secretary Chris Wright indicated that oil should be flowing through the pipeline again within days, but the situation remains volatile.
In related developments, Iranian attacks have also forced the shutdown of Qatari gas production, further exacerbating energy supply concerns and contributing to rising gas prices. This broader regional instability and its impact on critical energy infrastructure are driving global energy markets to multi-week and, in some cases, record highs, with significant implications for international trade and economic stability.
