Red Sea Attacks Push Oil Prices Above $100 Amid Escalating Yemen Conflict

An escalating wave of attacks around the Red Sea has pushed oil prices above $100 a barrel, as Houthi territorial gains near the Bab el-Mandeb Strait and strikes on Saudi energy infrastructure threaten a route that has become a critical alternative to the Strait of Hormuz.

On Sunday, Yemeni government forces, which are backed by Saudi Arabia, launched attacks against the Iran-backed Houthis along the Red Sea. The strikes were part of an effort to dislodge the Houthis after the rebel group captured the port city of Mokha and Perim Island at the mouth of the Red Sea, key positions that give the group a vantage point to threaten shipping through the Bab el-Mandeb Strait.

The Houthis also launched missiles at several areas in Saudi Arabia, and in recent weeks attacked the kingdom’s oil infrastructure and shipping. The group declared a blockade on Saudi vessels in July, but said other countries’ commercial shipping can continue through the narrow Bab el-Mandeb.

The escalation has pushed up energy prices around the world. It also potentially gives Iran leverage over the U.S. by threatening another maritime chokepoint, putting economic pressure on Washington just before the midterm elections.

The attacks come as diplomatic efforts to end the nearly seven-month-long U.S. and Israeli war with Iran have dropped off. An anticipated diplomatic meeting between Gulf countries and Iran was postponed, Omani Foreign Minister Badr Albusaidi announced on Sunday. The meeting, meant to take place in Oman on Monday, would have been the first talk between Iran and Gulf Cooperation Council countries to discuss the Strait of Hormuz since a mid-June memorandum of understanding between the U.S. and Iran collapsed.

The attacks have also reignited major fighting in Yemen’s yearslong civil war, which killed 150,000 people and created one of the world’s worst humanitarian crises. The U.N.’s migration agency said more than 82,000 people have been displaced by fighting in Yemen since the start of September. That includes more than 2,000 Yemenis who fled to Djibouti, which hosts a U.S. base on the other side of Bab el-Mandeb.

Saudi authorities said a projectile struck al-Tuwal in Jazan province, wounding two people and damaging a mosque, several buildings and vehicles. Earlier in the week, Saudi Arabia said a large wave of Houthi missile and drone attacks over four southern cities had injured 73 people.

The Houthis said they launched ballistic missiles and drones at the Sharurah military base in Saudi Arabia’s southern Najran region, near the border with Yemen. Saudi Arabia has not confirmed damage at the base.

The group alleged on Sunday evening that Saudi Arabia had conducted 58 airstrikes across Yemen during the preceding 24 hours, and 129 strikes across Yemen over the 48 hours before Saturday evening. Saudi Arabia has not confirmed those strikes.

Inside Yemen, government forces launched strikes near Mokha, Dhubab, and elsewhere in Taiz, claiming they destroyed Houthi vehicles and weapons. After initially retreating from parts of the western coast, government units said they were regrouping late Saturday and would return to battle.

The government-allied National Resistance said more than 500 of its fighters have been killed on the west coast over the past month, while more than 1,000 Houthis were killed in Hodeida and Taiz provinces over the same period.

Oil prices climbed more than 2% on Monday. Brent crude futures opened at $108.23 a barrel in late Sunday trading, up $3.62 or 3.46%, while WTI futures opened at $103.20, up $3.15 or 3.15% from Friday’s close. U.S. diesel prices surpassed $6 a gallon on Friday for the first time on record, while oil gained more than 8% last week, with Brent surging over $100 a barrel for the first time since July.

Saudi Arabia closed its East-West oil pipeline as a precautionary measure after multiple drones from Iraq damaged infrastructure in the Riyadh and Medina regions. No group has publicly claimed responsibility for the attack, although U.S. President Donald Trump said Iran was “probably” responsible. Saudi Arabia had recently rerouted around 4 million barrels per day—around 4% of global supply—through the pipeline to circumvent Hormuz.

The attacks around the Red Sea have also added a substantial risk premium to transit through Bab el-Mandeb. Increased Houthi activity can discourage shipping even though the group said it will only target Saudi-linked vessels, Allison Minor, the director of the Atlantic Council’s Project for Middle East Integration and former U.S. deputy special envoy for Yemen, warned in a July analysis of the blockade. Tanker owners may weigh delaying voyages or charging higher freight rates, which could quickly raise costs for consumers.

While some shipments could be redirected north through the Suez Canal or Egypt’s SUMED pipeline, both of those routes are estimated to carry smaller capacity than Bab el-Mandeb and could mean longer, possibly costlier, journeys for some cargoes.

Experts say the duration of the disruptions will determine whether the current price increase becomes a sustained supply shock. If operations resume quickly, the pipeline’s effect could remain limited, June Goh, a senior analyst at Sparta Commodities, told Bloomberg. An extended shutdown, however, could force Saudi Arabia, the world’s biggest crude exporter, to cut production, Goh said. Saudi Arabia reportedly has enough oil stored at Yanbu to sustain current exports for five to seven days.

The impact on global energy supply is exacerbated by severe restrictions through the Strait of Hormuz, which already pushed up energy prices around the world. The International Energy Agency (IEA) estimated that Gulf oil exports in August were nearly half their pre-war level. Global oil inventories have fallen by 507 million barrels since February, the agency said.

Thye May Ting, an analyst at Hong Leong Investment Bank, wrote in a research note that Brent is likely to remain elevated because of the combined pressure at Hormuz and Bab el-Mandeb, forecasting prices of $95 to $100 a barrel toward the end of the year.

Using a baseline of $110 a barrel, economist Mohamed Shadi projected Brent could reach a peak of $120 a barrel if 25% of oil flows through Bab el-Mandeb were halted, $145 if 50% of flows were impacted, and $229 under a complete shutdown.

Meanwhile, fighting near Hormuz has continued. A vessel transiting the Strait was struck by a projectile, causing a fire to break out onboard, the U.K. Maritime Trade Operations (UKMTO) reported on Sunday. Iranian state media said an Iranian commercial vessel was struck off its coast, killing one and wounding four.

The IEA projects world oil supply to average 100.7 million barrels per day this year, a decline of 5.7 million barrels per day from last year, according to its September report. It had previously forecast a year-over-year decline of 4.3 million barrels per day in August.

Saudi Arabia has reportedly pressed Washington for more military support, but the Trump Administration has so far resisted direct participation. Axios reported that Saudi Crown Prince Mohammed bin Salman called Trump twice on Thursday urging him to authorize U.S. strikes as the Houthis advanced along the Red Sea coast, but Trump refused. The U.S. had sent more than 100 military advisers to Saudi Arabia to provide military intelligence, according to CNN.

Trump said Saturday that the Houthis had called his Administration. “They would much prefer not having us involved, and they’re letting most ships go through. There’s just one country that they’re not too happy with, and we’ll get that straightened out,” Trump said.

The kingdom could independently intensify its air campaign and provide more support to Yemeni government forces on the ground, although Saudi air support reportedly failed to arrive during Thursday’s battle for Mokha despite requests from Yemen. A larger campaign could expose Saudi Arabia to more missile and drone retaliation from the Houthis, which it is likely keen to avoid after its costly intervention between 2015 and 2022 failed to defeat the group and prompted repeated attacks on Saudi cities, airports, and energy facilities.

Saudi Arabia could also turn to Pakistan and Turkey for help under the Mecca Joint Defence Agreement, signed last month. Riyadh has not formally invoked the pact before, but it could request additional intelligence and technological support, Riaz Khokhar, a researcher at Islamabad’s Institute of Regional Studies, wrote in Al Jazeera. Islamabad, however, may be wary of domestic opposition and a confrontation with Iran, Khokhar wrote. Instead, it might push for a multinational naval coalition to protect Bab el-Mandeb.

Saudi Arabia could also pursue diplomatic efforts to negotiate a cease-fire. Minor suggested in July that the Houthi campaign may be aimed at extracting concessions from Riyadh rather than creating an all-out war. Other analysts told Reuters that the Houthi gains could push Gulf governments toward accommodation with Tehran, especially since Iran’s talks with the U.S. have tapered off while fighting has intensified.