Saudi Oil Pipeline Halts After Drone Attack, Fuel Prices Surge Globally

Saudi Arabia has shut down its main east-west oil pipeline following a drone attack by Iran-backed Iraqi militias. The pipeline, which transports between 2.6 and 4 million barrels of oil daily, is crucial for bypassing the Strait of Hormuz, where tanker traffic has significantly decreased since February. The shutdown is expected to last three to five weeks, raising concerns about a severe global energy shortage.

This disruption adds to existing supply chain issues, including Houthi rebels in Yemen, also backed by Iran, who have severely impacted shipping in the Bab el-Mandeb strait. While some tanker traffic has resumed in the Strait of Hormuz, it remains well below pre-war levels. The combined effect of these disruptions threatens approximately 4% of the world's total oil supply.

Global fuel prices have already seen substantial increases. Since late February, diesel prices have jumped by 92% and gasoline by 61% in Nigeria, with significant rises also reported in Indonesia and Lebanon. In the US, the average gasoline price has reached $4.32 per gallon, a 45% increase, and diesel has hit a record high of $6.23 per gallon.

While Israel recently saw a slight decrease in gasoline prices due to a special order from the Ministry of Finance, analysts anticipate further price hikes that may be difficult for the government to control.