Crude rallied Tuesday, with U.S. West Texas Intermediate finishing at $105.83, up 4.4% and marking its strongest close since May 19. International benchmark Brent added 2.9% to $108.75. With tensions flaring across the region, oil has climbed more than 20% so far this month.
Riyadh halted flows through the East-West pipeline after damage last week from a drone attack launched from Iraq. Officials called the shutdown a "precautionary measure" and have not given a damage readout or a timeline for resuming service. The route is capable of moving 7 million barrels a day and has been a key way for Saudi Arabia to send crude to the Red Sea as the U.S. and Iran jockey for dominance in the Strait of Hormuz.
Trade sources told Reuters that Saudi Arabia notified European customers that some September crude cargoes are cancelled. In a separate pressure point, Reuters reported that protests forced Libya's national oil company to halt work at two oilfields and at a pumping station. And Goldman Sachs's Yulia Zhestkova Grigsby warned in a Monday note that attacks on oil infrastructure are a meaningful escalation and raise the odds of the bank's upside case in which Brent "exceeds $120."
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Iran-backed Houthi fighters in Yemen carried out fresh strikes on Saudi Arabia this week, with the Saudi-led military coalition in Yemen saying through a spokesperson that the group fired drones and ballistic missiles at Khamis Mushait, Abha and Taif. The security picture around Hormuz remains shaky too: the United Kingdom Maritime Trade Operations Centre has logged incident reports indicating that at least two tankers were attacked since Saturday.
The information battle is heating up alongside the shooting. U.S. Central Command rejected a claim from Iran's Revolutionary Guard that the Panama-flagged El Gaia hit a naval mine in the strait, stating instead that "The Panama-flagged oil tanker El Gaia was struck by an Iranian missile last month and rendered inoperable," and calling the mine claim "yet another example of their lies and intimidation attempts while they try to impede commercial vessels in the strait."
U.S. Energy Secretary Chris Wright told CNBC he expects the pipeline to restart in a matter of days, saying, "This will be a brief and temporary interruption." Until then, a mix of cancelled shipments, Libyan outages and headline risk around Hormuz can keep prices jumpy. If you buy fuel or food, you feel that quickly; if you hold energy exposure, expect sharper day to day moves as this plays out.
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