Saudi Pipeline Disruption Lifts Brent to $107.70
Drone attacks forced the closure of Saudi Arabia's East-West pipeline, spiking Brent crude to $107.70 and pushing UK gas to multi-year highs.
Brent crude futures surged to $107.70 per barrel on Monday after drone strikes on Saudi Arabia’s East-West oil pipeline forced a complete shutdown of the infrastructure. The international benchmark jumped 3% from its opening price, briefly touching $108 before settling near the higher level. The disruption directly impairs Saudi export capacity, with local traders warning that inventory stocks for export could be exhausted within days if the line is not restored.
The price spike coincides with heightened geopolitical risk in the Red Sea. The Houthi movement, aligned with Iran, seized the strategic Perim island in the Bab el-Mandeb Strait, expanding its control over this critical waterway. These attacks follow a broader pattern of infrastructure targeting that has destabilized regional energy flows, contributing to a sustained upward trend in global commodity prices.
Supply Constraints Tighten Global Markets
According to Bloomberg, Saudi Arabia previously informed OPEC that its August oil production was the lowest since 1990. This production floor, combined with the current pipeline outage, signals a severe supply squeeze. The market’s concern is further amplified by the postponement of diplomatic meetings between Gulf states and Tehran, which were intended to establish a temporary shipping corridor through the Strait of Hormuz. This strait normally carries one-fifth of global oil and gas supplies, making any closure a systemic risk to global energy security.
UK Gas Prices Hit Recent Highs
The impact on natural gas markets is equally pronounced. In the United Kingdom, the benchmark gas price rose 5% on Monday to 208.73 pence per therm. This marks the highest level recorded since December 2022. The rise reflects the spillover effect of Middle Eastern supply disruptions, as traders price in the risk of prolonged logistical bottlenecks affecting both crude and gas exports from the region.
Infrastructure Attacks Drive Price Volatility
Analyst Chris Beauchamp of IG noted that a return to spring price highs, where oil reached $126 per barrel in April, is increasingly likely. This trajectory is driven by the physical damage to energy infrastructure and the collapse of negotiations regarding safe passage in the Strait of Hormuz. The market is currently pricing in a scenario where supply disruptions persist, removing the previous assumption of a stable, long-term ceasefire that had allowed prices to decline during the summer.
