The conflict in the Middle East has entered a more dangerous phase, with the Strait of Hormuz, Red Sea and parts of Saudi Arabia facing growing military threats. The latest escalation involves Yemen’s Iran-aligned Houthi group, which launched missiles and drones towards a military air base in southern Saudi Arabia. The attacks came shortly after Saudi Arabia’s East-West oil pipeline was hit, disrupting an important alternative route for transporting crude while the Strait of Hormuz remains heavily restricted.
Why Is The Saudi Oil Pipeline Important?
The East-West pipeline has played a key role in reducing pressure on global oil markets. It allows Saudi crude to reach the Red Sea and avoid the Strait of Hormuz, through which a significant share of the world’s oil supply normally passes. With the pipeline now disrupted and shipping through Hormuz facing continued attacks, concerns over the availability of crude have increased.
The Houthis have also expanded their presence in Yemen, including taking control of Perim Island near the entrance to the Red Sea. The developments have added to fears about the security of another major international shipping route. Meanwhile, the UK Maritime Trade Operations agency reported that another vessel was hit by a projectile in the Strait of Hormuz on Sunday. The crew was evacuated after the ship caught fire.
US Faces Growing Pressure In Middle East
The escalation presents another challenge for US President Donald Trump, whose administration is attempting to limit the impact of the conflict on global energy supplies. Saudi Arabia has fought the Houthis since 2015, although hostilities had eased considerably during a period of ceasefire. That truce broke down in July following Houthi attacks and threats against Saudi-linked shipping.
According to Reuters, Washington has so far resisted Saudi requests for direct military involvement beyond providing intelligence assistance.
Oil Prices Cross $100 Per Barrel
The latest developments have pushed crude prices sharply higher.
•   Brent crude: Above $107 per barrelÂ
•   WTI crude: Around $103 per barrelÂ
•   Tapis crude: Around $110 per barrel
Tapis is particularly important for Australia because it influences wholesale fuel prices. The NRMA has warned that motorists could face further increases at petrol stations. The average price of unleaded petrol has risen to around $2.19 per litre, while diesel has reached approximately $2.68 per litre.
NRMA spokesperson Peter Khoury said the immediate direction for petrol prices was upward, although prices could decline quickly if tensions in the Middle East ease.
Global Oil Shortage Fears Grow
Analysts are increasingly concerned that continued disruption could rapidly reduce global oil inventories. Commonwealth Bank strategist Vivek Dhar said the closure of the Saudi East-West pipeline has significantly changed the amount of oil that needs to move through the Strait of Hormuz to prevent global inventories from falling.
His assessment suggests global oil and refined-product stockpiles could reach critically low levels within five to 11 weeks under a more severe scenario. If inventories fall too far, Brent crude could potentially climb towards $150 per barrel, according to the analysis, as extremely high prices force demand to fall, particularly across emerging Asian economies.
For comparison, Brent crude reached around $147 per barrel in July 2008, during the global financial crisis.
What Could Happen Next?
The combination of the Hormuz disruption, attacks on Saudi energy infrastructure and instability around the Red Sea has increased the risk of a wider global energy shock. Higher crude prices could translate into more expensive petrol, diesel, transportation and other goods, putting additional pressure on household costs.Â
For the US, the worsening energy situation could also make it more difficult to end its involvement in the conflict without appearing to have backed down.
