Oil prices have climbed above $107 a barrel, with Brent crude reaching as high as $108 on Monday. This 3% increase follows the closure of Saudi Arabia's East-West crude pipeline after a series of drone attacks. The pipeline is used to reroute approximately 4 million barrels per day to the port of Yanbu on the Red Sea.
Supply concerns have intensified as rebel Houthis in Yemen target oil infrastructure and capture a strategic island in the Bab al-Mandab strait. Further instability was reported in the Strait of Hormuz, where a merchant vessel was struck, killing one crew member. These developments have renewed fears that critical Middle East supply routes are closing.
Geopolitical tensions are rising as Saudi Arabia faces escalating attacks from Iran-allied militant groups. Consequently, Iran and Oman have delayed a meeting to discuss control of the Strait of Hormuz. While energy prices jump, stock futures have fallen slightly due to concerns that supplies from the Persian Gulf will be further diminished.
The Houthi offensive in Yemen has placed a second vital energy corridor under the sway of Iran and its allies, raising the stakes for global energy markets. A further decline in Saudi flows is expected to worsen the global supply crunch.