Saudi Oil Pipeline Shutdown Threatens Billions Amid Houthi Attacks

Saudi Arabia's East-West Oil Pipeline faces up to six weeks of shutdown due to drone strikes by Iran-backed militias in Iraq. The pipeline, a critical artery for oil exports from the kingdom's eastern fields to Red Sea terminals, was shut down last week.

The disruption threatens to strip tens of billions of dollars from Saudi Arabia's revenue just as Crown Prince Mohammed bin Salman prepares to host Wall Street executives at an investment conference in Riyadh. The timing is particularly challenging for the prince, who has effectively ruled Saudi Arabia for almost a decade and faces significant economic pressures.

Economists predict that if the pipeline remains shut for a month and oil volumes cannot be moved through the Strait of Hormuz, the Saudi economy could contract by 4.5%, worse than during the height of the Covid-19 pandemic in 2020. Brent crude has climbed to $108 a barrel, US diesel retail prices have hit record levels, and government bond yields are rising.

The attacks also tighten Houthi control over strategic chokepoints, including the Red Sea port city of Mokha and islands near the Bab el-Mandeb strait. The group has withstood bombing campaigns by Saudi Arabia, the UAE, the United States, the UK, and Israel since seizing Yemen's capital Sanaa in 2014.