Oil Prices Rise As Middle East Attacks Fuel Fears Of Prolonged Supply Disruption

Oil prices rose more than 3% in early Asian trade on Monday as fears of a major and prolonged supply disruption intensified following continued attacks in the Middle East and the postponement of a key meeting between Gulf states and Iran.

Both benchmarks remained higher, with WTI futures trading at $103.10 a barrel, up 2.16% on the day, while Brent futures rose 2.14% to $108.20 a barrel.

Over the weekend, Yemen’s Iran-aligned Houthi group said it had launched a large-scale missile and drone attack on Saudi Arabia, targeting a military base in Sharurah.

Saudi state media did not confirm the attack, but separately reported that a projectile had fallen in the Jazan region.

The reported attack was the latest escalation involving Saudi Arabia and Iran-aligned groups, following a drone attack last week on the kingdom’s East-West oil pipeline, which was launched from Iraq, according to Saudi authorities.

Meanwhile, the United Kingdom Maritime Trade Operations (UKMTO) said a vessel in the Strait of Hormuz had been struck by an unknown projectile.

The Associated Press later reported that an Iranian cargo vessel had been hit early on Sunday off Qeshm Island, although it was unclear whether the incident was the same attack reported by UKMTO.

Adding to concerns about supply disruptions, Oman’s Foreign Minister Badr Albusaidi said on Sunday that a meeting between Gulf states and Iran scheduled for Monday had been postponed because of a lack of consensus.

The meeting had been expected to discuss a potential agreement between Iran and Oman on the temporary management of shipping through the Strait of Hormuz. It would have been the first meeting since the conflict began between the Gulf Cooperation Council (GCC) states as a group and Iranian officials.

Oil markets had already been on edge following last week’s attacks on Saudi Arabia’s East-West pipeline, forcing the kingdom to shut one of the region’s key crude export routes.

Traders are concerned that up to 4% of global oil supply could be disrupted if the pipeline is not reopened within days. The extent of the damage remains unclear, with reports that several pumping stations were hit by drones launched from Iraq.

The pipeline is not the only potential threat to Saudi Arabia’s oil exports outside the Strait of Hormuz.

The Houthi group has also expanded its territorial control in Yemen, raising concerns over shipping through the Bab el-Mandeb Strait.

The group reached the strategically located island of Perim last week, according to reports. Control of the island could give the Houthis a position from which to monitor shipping and potentially disrupt traffic through the Red Sea waterway.