Brent crude jumped more than 3% to above $108 a barrel Monday after Saudi Arabia shut down a critical pipeline that had been the one major route for moving oil out of the country without passing through the Strait of Hormuz. Drones launched from Iraq damaged the East-West pipeline last Thursday, forcing Riyadh to close it; the kingdom hasn’t said how badly it’s damaged or when it might reopen.
Why does losing one pipeline matter so much to global oil prices?
The East-West pipeline can carry up to 7 million barrels a day, and it’s been doing exactly the job its name implies since the Iran conflict escalated: moving Saudi crude from the kingdom’s Persian Gulf production fields across the country to export terminals on the Red Sea, bypassing the Strait of Hormuz entirely. That workaround has been quietly easing the pressure on global supply even as tensions around the strait itself kept rising. With the pipeline down, that safety valve is gone at exactly the moment the strait is considered most dangerous, which is why traders pushed Brent past $108 rather than treating this as a routine, contained disruption.
What happens next?
A planned diplomatic meeting between Iran and Gulf Arab states to de-escalate the situation around Hormuz was abruptly postponed after the pipeline attack, removing one of the few near-term paths toward calming the market. Brent and U.S. crude are both up more than 60% so far this year, and this latest spike lands on top of an already-jittery week for markets, coming right as the Federal Reserve weighs a possible rate hike Wednesday that’s partly being driven by the same energy-cost pressure.
Sources: CNBC · Al Jazeera · Euronews · UPI
