Oil prices surge around 3 per cent in early Asian trading as a Saudi pipeline shutdown, Houthi activity around Bab el-Mandeb and stalled talks over the Strait of Hormuz raise fears of deeper supply disruptions.
Oil prices jumped around 3 per cent in early Asian trading on Monday as traders priced in worsening risks to Middle East crude supplies amid continued attacks and a lack of progress on regional diplomacy.
Brent crude rose about 3.2 per cent to $108 a barrel, while West Texas Intermediate (WTI) climbed 3.2 per cent to around $103.30 a barrel, extending gains as markets assessed the potential impact of disruptions to critical oil infrastructure and shipping routes.
A key concern for the market is the continued shutdown of Saudi Arabia’s East-West Pipeline following drone attacks. If operations are not restored soon, oil exports equivalent to roughly 4 per cent of global supply could be exposed to disruption, increasing pressure on an already fragile market.
The risks extend beyond production and pipelines. Houthi advances around the Bab el-Mandeb Strait have heightened concerns over tanker traffic through a vital route linking the Red Sea with the Gulf of Aden.
Meanwhile, the postponement of regional talks concerning the Strait of Hormuz has dampened hopes for a quick easing of tensions. Any prolonged disruption around Hormuz could have significant consequences for global energy markets because of the enormous volume of oil and other energy products transported through the waterway.
More from BusinessThe combination of attacks on energy infrastructure, growing risks to shipping and stalled diplomatic efforts has pushed traders to build a larger geopolitical risk premium into crude prices.
Markets are now watching for signs that Saudi Arabia can restore pipeline operations, whether attacks intensify and whether diplomatic efforts can resume. Until there is greater clarity on those fronts, oil prices are likely to remain volatile.
