Middle East Supply Disruptions Push Oil Prices to Four-Month Highs

The shutdown of Saudi Arabia’s 750-mile East-West Pipeline has left markets vulnerable. While the kingdom aims to resume partial operations within days, full repairs to damaged pumping stations could span two months. The pipeline, capable of moving 7 million barrels daily, is a vital alternative to the Strait of Hormuz. Compounding the instability, Houthi forces have seized Perim Island and the port of Mokha, tightening their grip on the Bab al-Mandeb Strait.

Physical supply constraints extend beyond the Saudi border. In Libya, guards have shuttered valves at three production sites, and Reuters reports that Saudi Arabia has suspended loadings at the Yanbu port. Meanwhile, U.S. retail diesel prices hit a record $6.27 per gallon. Tracy Shuchart of NinjaTrader Group warned that the market faces a simultaneous crisis in both crude and refined products with no immediate resolution in sight. Analysts at XS.com suggest that if Brent crosses $110 per barrel, global inflation concerns will likely intensify. With non-OPEC+ supply unlikely to expand significantly before 2027 and global inventories offering only a few weeks of coverage, the market remains acutely sensitive to geopolitical friction.