Oil Prices Spike After Saudi Pipeline Shutdown Fuels Global Energy Crunch

Saudi Arabia announced late Friday that it had shut down the East‑West crude pipeline as a precaution after a series of attacks the day before. The pipeline – a vital artery that lets Saudi oil bypass the volatile Strait of Hormuz – carries roughly 7 million barrels a day to Red Sea export terminals.

Markets reacted instantly. Global benchmark Brent nudged up toward $108 a barrel, after rallying almost 9 % last week, while West Texas Intermediate hovered near $103. European natural‑gas prices also climbed, spiking as much as 3.8 % on the news.

"It all boils down to the duration," said June Goh, senior oil analyst at Sparta Commodities. "If flows resume quickly, inventories at Yanbu – the pipeline’s western hub – can be drawn down, limiting the impact. A prolonged shutdown, however, could force output cuts and tighten global supplies."

On the diplomatic front, a meeting slated for Monday between Iran and several Gulf states to discuss a temporary shipping lane through Hormuz was postponed, Oman's foreign minister Badr Albusaidi confirmed. Bahrain withdrew, citing the pipeline strike, and reports suggest Riyadh also harbored reservations.

Meanwhile, traders are watching the rapid advance of Iranian‑backed Houthi militants along Yemen’s Red Sea coast. Their push could give them greater sway over the Bab el‑Mandeb strait – another chokepoint that could further strain oil flows.

Crude has surged roughly 77 % this year as the U.S.–Iran confrontation ripples across the region, curbing exports and throwing shipping markets into disarray. With Hormuz under contention, the East‑West pipeline has become a lifeline for maintaining export volumes.

The ongoing crisis is feeding inflation worldwide. Higher prices for crude, natural gas, gasoline and diesel have nudged U.S. consumer‑price indices upward in August, rekindling speculation about another Federal Reserve rate hike.

Iraq, too, is feeling the pinch. After investigators traced the pipeline strikes to launch sites inside Saudi territory, Baghdad has been scrambling to mitigate fallout and keep its own oil exports flowing.

In Washington, Treasury Secretary Scott Bessent signaled that a major bank would face sanctions on Monday, part of a broader effort to pressure Tehran. At the same time, the U.S. Navy has stepped up a blockade of Iranian ports to choke off its energy exports.

Market metrics underscore the nervousness: Brent’s prompt spread widened to $5.53 a barrel in backwardation, up from $3.84 a week earlier, indicating traders are paying a premium for nearer‑term deliveries.