Oil prices surge over $3 on fresh strikes in Persian Gulf

Brent crude jumped more than $3 per barrel after a cascade of attacks rattled the Persian Gulf, hitting Saudi Arabia’s critical pipeline infrastructure and a commercial vessel navigating the Strait of Hormuz. With prices already flirting with the $100 mark heading into September, the oil market’s margin for bad news was effectively zero.

What happened

The most consequential strike landed on September 11-12, when drones believed to have been launched by Iran-backed militias operating from Iraqi territory targeted Saudi Arabia’s East-West pipeline. Riyadh responded by suspending pipeline operations as a precautionary measure, cutting off a conduit capable of moving roughly 7 million barrels per day at full capacity.

In practice, the pipeline had been transporting around 4 to 5 million barrels daily before the shutdown.

Then on September 13, a projectile struck a vessel transiting the Strait of Hormuz, sparking fires onboard and forcing the crew to evacuate.

Earlier in the month, around September 8, Houthi strikes had already hit Saudi energy sites, causing injuries and amplifying concerns about Red Sea shipping routes.

A supply picture that was already tight

Saudi oil exports had already fallen to 3.2 million barrels per day in August, a multi-year low driven by months of regional disruptions. The Kingdom has been increasingly reliant on pipeline routes to Red Sea ports as an alternative to the Strait of Hormuz, which the ongoing US-Iran conflict has made treacherous for tanker traffic.

Brent crude had been approaching or exceeding $100 per barrel in the days leading up to the strikes. The $3-plus daily surge pushed prices further into territory that tends to trigger broader economic anxiety, from higher fuel costs for consumers to margin pressure on energy-dependent industries.

Why this escalation is different

First, the attacks targeted infrastructure rather than just shipping. Repairing or securing hundreds of miles of pipeline running through exposed desert terrain is a fundamentally different challenge than rerouting a tanker.

Second, the attacks came from multiple directions and multiple actors. Houthi strikes from Yemen, militia drone launches from Iraq, and vessel targeting in the Strait itself suggest a coordinated or at least coincidentally synchronized pressure campaign on Saudi energy exports.

Third, Saudi export volumes were already depressed before any of this happened. Starting from a multi-year low of 3.2 million barrels per day means there’s less slack in the system to absorb further disruptions.

Major financial institutions have been revising their oil price forecasts upward in response to the sustained geopolitical risk premium that has settled over Gulf energy markets. The consensus view among analysts is that prices are more likely to climb than retreat as long as the US-Iran conflict continues to restrict traffic through the Strait of Hormuz.

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