Oil Supply Threatened by Strait of Hormuz Attack and Pipeline Closure

The global oil market faces the potential for a new crisis following an attack on a merchant vessel in the Strait of Hormuz and the closure of Saudi Arabia's key "East-West" oil pipeline. Saudi oil buyers and traders informed Reuters on Sunday, September 13, that exportable Saudi crude supplies could be depleted within five to seven days if the pipeline, which runs through the Red Sea, does not resume operations soon. This disruption could remove approximately 4% of global oil supply from the market, potentially driving up energy prices, which have already seen Brent crude exceed $100 per barrel last week.

Saudi Arabia cited the drone attack, which was reportedly launched from Iraq by Iran-backed militias, as the reason for the precautionary shutdown of the East-West pipeline. This 1,200 km pipeline has become a critical route for Middle Eastern oil to the global market over the past six months, especially due to blockades in the Strait of Hormuz, transporting 4 to 5 million barrels per day. Concurrently, the U.S. Central Command (CENTCOM) stated on September 12 that its naval blockade of Iranian ports had stopped around 100 merchant vessels in the past two months, with "no vessel passing through the blockade without the permission of the United States military."

Earlier on August 13, Iran reported that one of its merchant ships was hit near Qeshm Island in the Strait of Hormuz, resulting in one death and three injuries. The UK Maritime Trade Operations (UKMTO) confirmed the vessel sustained damage from an unidentified strike while transiting the strait.

The article suggests that the U.S. and Israel's war, initiated on February 28, aims to weaken Iran's influence in the Strait of Hormuz and halt its oil exports, thereby accelerating Iran's economic decline. However, the conflict, now in its seventh month, remains unresolved with no diplomatic progress since a June agreement collapsed. Low-intensity hostilities persist, and the U.S. appears to lack a clear exit strategy. While economic pressure on Iran has not yet sparked a popular uprising, cornering the regime could lead to military escalation. Meanwhile, Houthi rebels in Yemen have intensified attacks on Saudi Arabia and seized the strategic port of Al-Mukha on the Red Sea, gaining control of the Bab el-Mandeb Strait, further contributing to oil price volatility.

U.S. President Donald Trump acknowledged that fuel prices are likely to remain high at least until the November midterm elections.