Saudi Arabia has temporarily closed its major East-West oil pipeline following an attack, sparking concerns about the stability of global crude supplies. Meanwhile, the growing influence of Iran-backed Houthi forces along Yemen’s Red Sea coast poses additional risks to regional oil shipments. The Houthis have gained significant territory near the Bab el-Mandeb Strait, a crucial passageway connecting the Red Sea with the Gulf of Aden, heightening worries about the security of oil transportation in the area.
The Saudi East-West pipeline, stretching 1,200 kilometers, was shut down on September 12 as a precaution after it was targeted a day earlier. This pipeline is vital for Saudi Arabia as it facilitates the movement of crude oil from its eastern production zones to the Red Sea, offering an alternative export route when passage through the Strait of Hormuz is compromised. Following disruptions in the Strait of Hormuz during the US-Iran tensions, Saudi Arabia had boosted exports through its Red Sea facilities, making the latest attacks a potential threat to its oil export capabilities.
Market analysts warn that an extended closure of the pipeline could significantly reduce the oil available on global markets. This concern is exacerbated by the fact that Brent crude prices have already surged past $100 a barrel amid rising Middle East tensions. If both the Strait of Hormuz and the Bab el-Mandeb Strait experience substantial disruptions, the impact on global energy supplies could be severe, potentially driving up transportation costs and crude prices further.
An increase in oil prices could trigger inflation in major economies by raising the costs of fuel, transportation, and production. Countries heavily reliant on imported energy might face additional financial strains, impacting their trade balances and currency stability. The duration of the pipeline’s shutdown and the ongoing security challenges around the Red Sea and the Strait of Hormuz will play crucial roles in determining the broader effects on global oil supplies and energy markets.