The escalating conflict across the Middle East has triggered fresh disruptions to global energy flows, with Saudi Arabia confirming it will halt planned October crude oil deliveries to at least two European refining customers that purchase oil under long-term term supply contracts. Such pauses are permitted under force majeure clauses, which allow suppliers to cancel obligations during unforeseen extraordinary events outside of their control.
This latest supply disruption comes just weeks after Qatar extended a force majeure declaration for liquefied natural gas shipments through early November, a move prompted by escalating maritime tensions that have threatened safe passage through the Strait of Hormuz, the world’s busiest chokepoint for global energy trade. For weeks, Saudi Arabia had managed to avoid major disruptions to its export network thanks to its 1,200-kilometer East-West Pipeline, which connects oil fields in the Persian Gulf directly to the Red Sea export terminal at Yanbu. This critical infrastructure allowed the kingdom to bypass rising tensions around the Strait of Hormuz, where Iran and the United States have engaged in escalating tit-for-tat confrontations that threatened shipping lanes. Before the latest wave of conflict, the pipeline enabled Saudi Arabia to maintain roughly 6 million barrels per day of pre-conflict export volumes, equivalent to around 4 million barrels per day, keeping global markets relatively stable.
That stability shattered last week, when a drone attack targeting the East-West Pipeline disabled the critical infrastructure. Saudi officials have traced the attack to militant groups based in southern Iraq that are aligned with Iran, while Houthi militants based in Yemen have separately claimed responsibility for coordinated attacks on the Yanbu port and other key oil facilities operated by Saudi Aramco, the kingdom’s state-owned national oil company.
The current escalation traces back to a recent Houthi offensive in Yemen that gave the group full control over Yemen’s entire Red Sea coastline. Since seizing that territory, Houthi forces have launched a steady campaign of drone and missile attacks against Saudi energy infrastructure, while the Saudi-led coalition has responded with intensive airstrikes on Houthi-held territory in Yemen. In response to the Houthi declaration of an embargo on all Saudi-flagged and Saudi-bound shipping, the kingdom has rerouted remaining oil shipments through the Suez Mediterranean Pipeline to maintain access to European and North American markets.
The combination of supply disruptions and heightened geopolitical risk has already pushed global energy prices sharply higher. Brent crude, the global benchmark for oil prices, was trading at $103 per barrel as of Friday, but energy analysts warn that this publicly traded price does not reflect the actual physical market cost of securing immediate crude deliveries. Prices for refined products critical to global transportation and industry, including diesel and jet fuel, have climbed even faster than crude, with U.S. diesel prices jumping 7.7% in just one week despite the United States’ relative insulation from global Middle East disruptions thanks to its large domestic energy production sector.
This current chapter of conflict comes 10 years after Houthi forces seized large swathes of northwestern Yemen, prompting Saudi Arabia to lead a coalition of Arab states aimed at ousting the group from power and restoring the internationally recognized Yemeni government to power. In 2015, the coalition launched a large-scale military intervention, but after years of stalemate, Saudi Arabia began efforts to extricate itself from the conflict following a 2022 ceasefire agreement between the Houthi movement and the Yemeni government. To date, however, Saudi Arabia has maintained a strict air and sea blockade of Houthi-controlled ports and airports, a core demand the Houthi movement says must be met before it will end its current embargo on Saudi shipping.