“Further escalation could quickly put upward pressure on prices.”
Oil prices began to fall. $104.71 (down 1.06%) costs a barrel of West Texas Intermediate for deliveries on X on NYMEX in New York. In turn, Brent crude oil on ICE on November is valued at USD 108.07. per barrel, lower by 0.63 percent.
Let us recall that before February 28, when the US and Israel's war with Iran broke out, Brent crude oil cost approximately USD 72 per barrel, and at the peak of the conflict, at the end of April, it exceeded USD 126.
Investors were somewhat reassured by the data on a solid increase in American raw material inventories. Although analysts believe that the increases in oil prices in the previous days in response to disruptions in supplies of raw materials from the Middle East seem exaggerated, they remain cautious in assessing the situation. It is not known how long the decline in oil prices will last, as the situation in the Middle East remains tense.
For now, I would treat this as a moment of respite in oil markets, rather than a clear change, said Charu Chanana, chief investment strategist at Saxo Markets. As she emphasized, "the risk remains serious."
Any further escalation of the conflict in the Middle East or prolonged interruptions in energy supplies from the region may quickly put upward pressure on prices, she added.
A key oil pipeline has been closed. This is an alternative when the Strait of Hormuz is blocked
Brokers say that it cannot be ruled out that Brent crude oil will reach prices as high as $150. per barrel. The supply situation on the oil markets became much more complicated when the Ministry of Energy of Saudi Arabia announced on Friday the temporary suspension of the operation of the strategic East-West oil pipeline. It transports 4-5 percent. world supply of raw materials. This was the result of the attacks that took place last Thursday in the area of Riyadh and Medina.
The closed oil pipeline crosses Saudi Arabia from east to west and has become an alternative for the country in recent months due to Iran's blockade of the Strait of Hormuz, which before the war transported about a fifth of the world's oil and liquefied natural gas (LNG) trade. Closing the pipeline deprived Saudi Arabia of the ability to redirect oil exports from the Persian Gulf to the Red Sea, bypassing the Strait of Hormuz. It is through this route that the state oil company Aramco has recently sent a significantly increased volume of oil to ports on the Red Sea.
For now, it is unclear when the East-West oil pipeline in Saudi Arabia will be launched. Meanwhile, US Secretary of Energy Chris Wright told CNBC that the supply interruption "will be counted in days." Earlier, however, the Associated Press reported that the pipeline may be offline for several weeks. This may mean that there will be a shortage of up to several million barrels of oil per day on the market.
Meanwhile, traffic through the Strait of Hormuz remains restricted due to Iranian attacks on ships and mine threats, and navigation in the Red Sea is hampered by attacks by pro-Iran Houthi rebels from Yemen. As a result, oil and freight prices are rising, increasing the risk of inflation rising again in many countries around the world.
Another strategic strait at risk?
Yemen's Iran-backed Houthi rebels said on Monday they had fired dozens of ballistic missiles and drones at a military base in Khamis Mushayt in southern Saudi Arabia. They added that Saudi troops carried out 54 airstrikes against Houthi targets in the last 24 hours.
In recent days, the Houthis have intensified their offensive against government troops supported by Saudi Arabia. Over the weekend, the media reported that the Houthis had already taken over the entire Yemeni Red Sea coast, occupying, among others, Perim Island in the strategically located Bab al-Mandab Strait. The isthmus leads from the Red Sea to the Gulf of Aden and lies on the route between Europe and Asia.
When supplies run out, Saudi Arabia will face a huge challenge
What matters is how long Saudi Arabia can maintain exports without supplies via the East-West oil pipeline. According to sources from the British daily "The Guardian", the supplies in the terminal in Yanbu will be enough for five to seven days, and those accumulated in the Egyptian ports of Ain Sukhna and Sidi Kirir - for several more days.
Once supplies run out, Saudi Arabia will have little ability to replace the pipeline. Transport south through the Bab al-Mandab Strait is virtually closed to Saudi oil. The Houthis have announced a blockade of Saudi ships, so oil from Yanbu must be directed north, towards Egypt, and reach recipients in Asia via a longer and more expensive route around Africa.
Fully loaded tankers, however, have too deep a draft to pass through the Suez Canal. Part of the cargo must therefore go to the Sumed oil pipeline, leading from Ain Sukhna to Sidi Kirir on the Mediterranean Sea. Transshipment and limited infrastructure capacity limit the amount of Saudi oil that can be routed through Egypt.
“This will keep oil prices high.”
Due to the tense situation in the Middle East, analysts do not rule out a worst-case scenario. Francisco Blanch, head of commodity and derivatives research at BofA Securities, warned that the price of Brent crude oil could rise to as much as $150. per barrel if key infrastructure such as the Saudi East-West oil pipeline "is permanently damaged."
As Saul Kavonic, senior energy analyst at MST Marque, noted, "the situation in the Middle East continues to escalate."
The market is struggling to keep up with emerging threats to the flow of oil through the Strait of Hormuz and the Red Sea, as well as damage to oil pipelines and ships, he said. He emphasized that "unfortunately, this will keep oil prices high."
Vance announced 'completely different phase of war'
For now, there is no end in sight to the US war with Iran, which has been ongoing since the end of February 2026. At the same time, US Vice President J.D. Vance told The New York Post that the war with Iran will enter a "completely different phase" in a few months.
Vance pointed out that it is US President Donald Trump who decides when conflicts start and end.
