Fears of rising oil prices are mounting following drone attacks by Houthi rebels on Saudi Arabia's critical Petroline pipeline, which has forced its closure. The strikes occurred as Iranian-backed Houthi fighters advanced, seizing Yemen's Red Sea coast and key islands.
This development poses a significant blow to Saudi Arabia, the world's largest crude oil exporter. The Petroline had been instrumental in bypassing potential disruptions to the Strait of Hormuz, a primary shipping route for Asian markets. Oil was piped 745 miles west to Saudi Arabia's Red Sea port of Yanbu. However, the Houthi control of the Yemeni coastline now makes oil tankers departing from Yanbu potential targets, particularly in the narrow Bab al-Mandab strait.
The Houthis have claimed that navigation remains safe for all companies except Saudi vessels. However, they have also stated that they will indefinitely close the Bab al-Mandab strait in the event of a coordinated attack by foreign powers. Even if the Petroline reopens, Asia-bound exports would likely need to reroute through the Suez Canal and around the Cape of Good Hope, significantly increasing shipping costs.
Experts warn that these increased costs would further pressure crude oil prices, which are already above $100 a barrel, potentially leading to higher fuel and energy expenses for consumers as winter approaches. The Petroline had been pumping between five and seven million barrels per day, approximately 5% of global demand, before the attack.
The drones used in the attack were launched from inside Iraq by an Iranian-backed militia. This incident has reportedly embarrassed the Iraqi government, which has close ties with Saudi Arabia. While Iraq has pledged to investigate and has dismissed a military commander from counter-militia operations in its southern Maysan province, Saudi Arabia has expressed condemnation but will not retaliate at the request of Baghdad.
Meanwhile, the internationally recognized Yemeni government has initiated a counter-offensive against Houthi positions near the Red Sea port of Mocha. Despite Saudi Crown Prince Mohammed bin Salman's reported personal appeal to U.S. President Trump to take military action against the Houthis, Trump has declined.
Speaking in Dublin, President Trump stated that the Houthi offensive would "work out just fine" and that Houthi leaders had indicated they did not wish to engage with the U.S. He expressed a relaxed view regarding the threat to Red Sea shipping, asserting that only Saudi Arabia was affected and that they would resolve the issue. Trump reiterated his belief that the Iran War would conclude soon, which he anticipates will lower oil prices.