Gulf states called off Monday’s planned meeting with Iran on reopening the Strait of Hormuz the same day Yemen’s Houthis fired dozens of missiles and drones at Saudi Arabia’s King Khalid airbase in Khamis Mushait, calling it retaliation for more than 300 Saudi airstrikes on Yemen in five days.
A Friday drone attack Riyadh blamed on Iran-backed fighters in Iraq knocked out Saudi Arabia’s East-West pipeline, the kingdom’s only route around the blockaded strait. The 7-million-barrel-a-day line feeds the Red Sea port of Yanbu, with traders telling Reuters its closure could cut off up to 4% of global oil supply if it stays down. Yanbu has five to seven days of oil left, unnamed sources told Reuters, and at least four Asian refiners have received no word on loading schedules at a port that normally moves 4 million barrels a day.
Brent rose more than 3% when markets reopened Monday; WTI traded at $104. U.S. diesel hit a new record above $6.23 a gallon, part of a run-up that has already cost U.S. drivers more than $100 billion in extra fuel spending since the war began. ING kept its fourth-quarter Brent forecast at $80, citing volumes still moving through Hormuz itself.
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The Houthis captured Perim Island, which splits Bab al-Mandeb in two, on Friday, then deployed fighters on Greater and Lesser Hanish, 86 nautical miles north. The strait carries 12% of global trade, including 11% of maritime oil and 8 percent of LNG. Former State Department official David Schenker called simultaneous Iranian leverage over Hormuz and Bab al-Mandeb “the worst-case scenario … two of the leading energy choke points in the world.”
Saudi Crown Prince Mohammed bin Salman met U.S. Central Command chief Admiral Brad Cooper in Jeddah on Monday after seeking American strikes on the Houthis, but Washington offered intelligence-sharing instead. U.S. President Trump said Sunday the U.S. could stay in Iran and “keep the oil,” comparing it to Venezuela and saying oil sales there had “paid for the war many times.” He repeated that gas prices would “drop like a rock” once the war ends, which he expects shortly after the midterms.
By Charles Kennedy for Oilprice.com
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