New Houthi attack on Saudi Arabia pushes oil prices up

Oil prices rose sharply after a new missile attack by the Houthis on Saudi Arabia, again calling into question the security of one of the key alternative routes for Saudi oil exports. Subsequently, quotes retreated from highs amid reports of US-Iran negotiations on the opening of the Strait of Hormuz.

Saudi Arabia announced the interception of six ballistic missiles launched by the Houthis from Yemen. According to the Riyadh-led coalition, targets included the city of Taif and the Yanbu area on the Red Sea coast. The missile launches toward those cities were also confirmed by the Saudi Press Agency.

Yanbu is of particular importance to the oil market. Through this port, Saudi Arabia can export oil from the Red Sea bypassing the Strait of Hormuz, the functioning of which remains disrupted due to the war with Iran. Crude is delivered to Yanbu via the East-West pipeline, which in recent months has become one of the main alternative routes for Saudi exports.

As The Guardian writes, after reports of the attack, oil quotes rose by about 3% and reached highs of about a week. The market intensified fears that further escalation could complicate Saudi oil supplies through the Red Sea.

The Houthis claimed that they attacked targets in Saudi Arabia, including Saudi Aramco facilities in the Yanbu area. The Saudi side reported intercepting the missiles, but immediately after the attack it was not clear whether any damage had been done to oil infrastructure.

However, the market reaction proved to be brief. According to Bloomberg, Brent later fell below $106 per barrel after an increase of more than 7% over the previous two days, while US WTI traded near $93.

Pressure on prices increased amid reports that US and Iranian officials, on the sidelines of the UN General Assembly, are discussing a phased agreement to restore shipping through the Strait of Hormuz. According to Bloomberg, Tehran sent Washington a new proposal that suggests the possibility of opening the strait for seven days if certain conditions are met.

As a result, the oil market found itself under the influence of two opposing factors. Houthi attacks and the threat to the route through Yanbu increase risks to physical supplies, while a possible resumption of traffic through the Strait of Hormuz could return significant volumes of oil to the market and ease the deficit.

Based on materials from: The Guardian, Bloomberg, Saudi Press Agency