Oil prices rose by more than 3% in early trading as concerns over regional supply disruptions intensified following fresh Houthi attacks on targets in Saudi Arabia and additional strikes in the Strait of Hormuz.
The postponement of planned talks between Iran and Gulf countries over the Strait of Hormuz added to concerns about oil supplies, increasing the market risk premium and keeping crude prices close to their annual highs.
Brent crude futures climbed as much as 3.5% to $108.41 per barrel before trimming some of their gains to trade at $107.37. West Texas Intermediate crude futures also rose 3.9% to $102.84 per barrel.
Oil prices were primarily supported by fresh attacks carried out by Yemen’s Houthi group against targets inside Saudi Arabia over the weekend.
The Iran aligned Houthi group has strengthened its position, allowing it to carry out broader attacks around the Bab el Mandeb Strait while also targeting critical Saudi energy infrastructure.
These developments followed a series of Houthi attacks last week on major Saudi facilities, including an Aramco refinery and fuel storage facility, as well as several fuel installations, airports and vessels around the Bab el Mandeb area.
The situation is placing additional pressure on one of the most important oil supply routes in the Middle East, particularly after a significant portion of Saudi crude exports that previously moved through the Strait of Hormuz was redirected toward the Bab el Mandeb route.
Saudi Arabia announced the closure of a major pipeline linking the eastern and western parts of the country following renewed Houthi attacks. Reports also indicated that the group targeted additional locations inside Saudi Arabia and attacked more vessels around Bab el Mandeb.
ANZ analysts said in a note that Riyadh had now lost the option of relying on western export routes if conditions in the Strait of Hormuz deteriorate again, increasing the likelihood of further upward pressure on oil prices during the week.
In a separate development, Omani Foreign Minister Badr Albusaidi announced that a regional meeting scheduled between Iran and Gulf countries had been postponed.
News of the meeting had helped limit oil price gains during the previous week as investors hoped renewed diplomatic efforts could reduce the risk of further supply disruptions across the region.
However, with the meeting postponed indefinitely, the Strait of Hormuz is likely to remain a key source of tension in the near term. Oil flows through the strait had already fallen to a fraction of their prewar levels following renewed hostilities between the United States and Iran in August.
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