Pipeline Attack Sparks Oil Price Fears Amid Increased Middle Eastern Risk
The recent drone attack on Saudi Arabia's East-West oil pipeline has significantly increased Middle Eastern oil risk, according to analysts. The pipeline, which is the largest in the region and carries 7 million barrels of oil per day, was shut down after being attacked by projectiles on Thursday.
The Wall Street Journal reported that the foreign ministry believes the strikes were launched from Iraq, where Iran-linked militias have been carrying out attacks. Yemen's Houthi faction has also been targeting oil infrastructure around the Red Sea in recent weeks.
The East-West pipeline is crucial for Saudi Arabia as it allows the country to divert its oil away from the Strait of Hormuz, through which 20% of the world's oil exports pass. If this pipeline is damaged, it could lead to a severe oil deficit and higher prices. On Friday, Brent crude settled at $104.61 per barrel, up 8.7% on the week.
Even after the Iran war ends, analysts expect Iran to continue attempting to control the Strait of Hormuz. Several countries in the region have started building new pipeline routes out of the area, including the United Arab Emirates and Iraq. Chevron is also considering adding oil-drilling sites in Iraq and may help build pipelines.