Concerns over potential oil price hikes are mounting after drone attacks attributed to Houthi rebels forced Saudi Arabia to shut down its vital Petroline pipeline. The incident follows a swift advance by Iranian-backed Houthi fighters who have taken control of Yemen's entire Red Sea coast, including three key islands.
This development deals a significant blow to Saudi Arabia, the world's largest crude oil exporter. The Petroline pipeline was a crucial artery, pumping five to seven million barrels of oil daily – approximately 5 percent of global demand – west to the Red Sea port of Yanbu. This route was designed to bypass Iran's efforts to disrupt shipping through the Strait of Hormuz, a primary route for oil heading to Asian markets. The pipeline's closure means oil tankers departing from Yanbu are now vulnerable to attacks from Houthi positions along the southern Yemeni coastline, particularly in the narrow Bab al-Mandab strait.
The Houthis have asserted that navigation remains safe for all companies except Saudi vessels, but have also warned of indefinite closure of the Bab al-Mandab strait in the event of coordinated attacks by foreign powers. If the Petroline remains offline, Asia-bound exports would need to be rerouted north through the Suez Canal, then around the Cape of Good Hope, incurring increased shipping costs that experts predict would further inflate crude oil prices, which are already above $100 a barrel.
The drones used in the attack on the Petroline were reported to have originated from within Iraq, a development that has embarrassed the Iraqi government, which maintains close ties with Saudi Arabia. Baghdad has pledged to investigate the origins of the drones and has dismissed the military commander responsible for counter-militia operations in Maysan province. Saudi Arabia has issued a strong condemnation of the attack but will refrain from retaliation at the request of Iraq.
Meanwhile, the internationally recognized Yemeni government has initiated a counter-offensive against Houthi positions near the Red Sea port of Mocha. Despite pleas from Saudi Crown Prince Mohammed bin Salman for military action against the Houthis, U.S. President Donald Trump has declined to intervene directly.
Speaking in Dublin, President Trump characterized the Houthi offensive as something that "would work out just fine" and noted that Houthi leaders had communicated to the U.S. their lack of desire for conflict. He appeared unconcerned about the implications for Red Sea shipping, stating that the issue primarily affected Saudi Arabia and that they would resolve it. Trump reiterated his belief that the Iran War would soon conclude, which he expects to lead to lower oil prices.