The oil market has once again shown how quickly it can adapt to abrupt changes on the ground. A week ago, an attack by Iranian-backed Houthi rebels in Yemen and drone strikes by Iranian-backed militias in Iraq paralysed what had become Saudi Arabia's main route for exporting oil since the start of the Iran war. Oil prices surged to over $108 a barrel on fears of fresh disruption to global supplies.
But as we've seen time and again in recent months, things rarely stay still for long in the energy sector, and now Saudi Arabia is diverting oil back to its Gulf Coast. More on this below.
While crude supply disruptions remain the market's main focus, tightening diesel supplies and surging prices now appear top of mind for President Donald Trump. Read my latest column to find out more.
Saudi Arabia, the world's top oil exporter before the Iran war, has proven to be highly flexible during this now seven-month conflict. That was on display again in recent days, as the Kingdom, facing the closure of its East-West pipeline, diverted oil to its east coast Ras Tanura export terminal, where tankers are being loaded to sail through the Strait of Hormuz.
Though traffic through the narrow waterway remains constrained amid sporadic Iranian attacks on ships in the area, oil producers are increasingly willing to take the risk. These volumes are helping offset some of the exports lost on the West Coast, easing pressure on oil prices, which fell back below $105 a barrel on Thursday.
When the East-West pipeline will resume operations is anyone's guess. Two pumping stations serving the critical pipeline were damaged in an attack last week, and the repair timeline remains unclear, according to assessments from three oil and security sources.
The rapid advances of the Iran-backed Houthi rebels in Yemen in recent weeks tightened their grip over the Bab el-Mandeb strait at the southern end of the Red Sea. It also emboldened Tehran in its continued standoff with Washington, which has so far stayed on the sidelines of the fighting in Yemen.
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