Crude oil futures climbed sharply on Sunday after Saudi Arabia shut down a vital pipeline capable of circumventing the Strait of Hormuz. U.S. West Texas Intermediate (WTI) crude jumped 2.8% to $102.87 per barrel as of 6:27 p.m. ET, while the international benchmark Brent crude advanced 3.1% to $107.87 per barrel. The shutdown came after a drone strike on Thursday, attributed to Iraqi forces, damaged the East-West Pipeline, forcing the Saudi government to halt operations on this crucial export artery. Riyadh has yet to disclose the full extent of the damage or the expected duration of the closure.
Meanwhile, a diplomatic gathering between Iran and Gulf Arab states, initially planned for Monday in Oman to address the Strait of Hormuz situation, was suddenly postponed in the wake of the pipeline attack. Omani Foreign Minister Badr Albusaidi wrote on social media on Sunday that the regional meeting, originally scheduled to take place in Salalah, had been delayed to reach a consensus, reaffirming his country's commitment to dialogue and efforts to ensure regional stability and lasting cooperation. Additionally, the safety outlook in the Strait of Hormuz remains precarious, as the United Kingdom Maritime Trade Operations reported another tanker attacked on Sunday, with a fire breaking out aboard the vessel.
The Saudi pipeline, with a capacity to transport up to 7 million barrels per day, plays a critical role in mitigating potential severe disruptions to crude supply stemming from tensions with Iran. Crossing the kingdom from producing areas near the Persian Gulf to export terminals on the Red Sea coast, the pipeline is instrumental in enabling Saudi Arabia to reroute its oil exports outside the Persian Gulf region amid the ongoing standoff between Iran and the United States over control of the strait. Aramco Chief Executive Amin Nasser highlighted during the company's August earnings call that the pipeline has been more crucial than large-scale strategic petroleum reserve releases led by the U.S. in stabilizing the oil market.
Over the past few days, Saudi Arabia has faced successive attacks from Iran-aligned groups. According to Saudi state media, Yemen's Houthi rebels struck Saudi energy facilities and other civilian targets earlier last week, injuring more than 70 people. Following their seizure of the western Yemeni port city of Mocha, the Houthi forces have reportedly taken control of Perim Island, a strategic outpost in the Bab el-Mandeb Strait. This advancement is likely to boost the group's capability to interfere with oil shipments through the Bab el-Mandeb, a critical southern gateway to the Red Sea linking to global markets. The Houthis had already declared a maritime blockade against Saudi Arabia in July.