Saudi Arabia has shut down its major East-West oil pipeline, which transports approximately 5% of the world's daily oil supply, following a drone attack originating from Iraq.
The Saudi Ministry of Energy announced the closure as a precautionary measure, stating the kingdom would not immediately retaliate to allow the Iraqi government an opportunity to address the situation.
Iraq's Prime Minister Ali al-Zaidi has ordered an investigation into the operations command in Maysan province, from where authorities determined the attacks were launched. The commander of that unit has been dismissed.
This incident follows a July confrontation where Saudi Arabia and the United States conducted airstrikes against Iranian-backed militias in Iraq, which they blamed for earlier drone attacks on Saudi oil facilities. Regional officials suggest that Houthi rebels aided Iraqi militias in planning and executing these attacks.
Strategic Importance of the Pipeline
The East-West pipeline, constructed in the 1980s, has been crucial for Saudi oil exports, particularly when the Strait of Hormuz faces disruptions. By early June, Saudi Arabia had more than doubled its oil exports from the Red Sea port at the pipeline's terminus to over five million barrels per day, according to the International Energy Agency.
Broader Regional Tensions
The pipeline shutdown occurred shortly after Yemen's Houthi rebels captured the strategic island of Mayun at the southern entrance to the Red Sea, marking a new escalation in regional conflicts. Saudi Arabia, the world's largest oil exporter, has increasingly utilized the Red Sea route as an alternative to the Strait of Hormuz, where Iran has been targeting shipping.
Houthi efforts to impede traffic through the 17-mile Bab el-Mandeb channel have complicated this alternative route. The rebels have vowed to escalate their confrontation with Saudi Arabia, stating that maritime navigation remains safe for all companies except for Saudi vessels.
Crude oil prices have recently surged above $100 per barrel, a development that could increase Tehran's leverage in any diplomatic negotiations.
The Houthis have been targeting Saudi shipping on the Red Sea since declaring a blockade in July, in response to the kingdom's prolonged blockade of Houthi-controlled areas in Yemen. They have also attacked oil infrastructure within Saudi Arabia.
In retaliation, Saudi Arabia struck the airport in the port city of Mokha after its seizure by the Houthis on Thursday, according to a Houthi broadcaster. No damage or casualties were reported.
Market nervousness is palpable, with experts describing the Houthis as unpredictable actors. Shipping through the Bab el-Mandeb Strait has reportedly decreased by about 60% since the Houthis began their attacks in late 2023. Although shipping saw an increase earlier this year as Saudi Arabia sought alternative routes, renewed Houthi threats have curtailed this activity, according to Lloyd's List Intelligence. This has forced Saudi Arabia to explore further alternatives, such as rerouting oil north to the Mediterranean via Egypt, a significantly longer route for Asian clients. The Houthis have also threatened this route, striking a Saudi vessel in the northern Red Sea in late August.