$107 Oil Surge as Saudi Pipeline and Hormuz Disruptions Bite
Oil prices surged past $107 on Monday after a weekend of bad news from the Gulf region. The Brent crude price for October and November deliveries jumped over 3% to cross $108 a barrel, while the US benchmark WTI rose 2.3% to around $102.
The price increase followed Saudi Arabia's announcement that its East-West pipeline is temporarily closed after drone attacks. This line carries crude across the kingdom to Red Sea ports, providing an alternative route for oil exports without passing through the Strait of Hormuz, which has been a point of contention in recent times.
The strait itself saw another incident on Sunday when a merchant vessel was hit, killing one person and injuring three others. The Iranian authorities confirmed this incident, highlighting the dangers faced by ships transiting the waterway.
Passage through the Strait of Hormuz has changed significantly since the war began. Vessels must now obtain permission from Iran to transit, and Tehran is considering introducing a mechanism to charge service fees. Ships that fail to comply are regularly targeted, while US forces periodically bomb the Iranian coastline to contest Tehran's claim to control the strait.
The diplomatic efforts have stalled too, with Oman postponing planned talks between Iran and Gulf states on the future of the waterway. The consequences of these disruptions are evident in record fuel prices and finger-pointing among world leaders.