Oil rises as Saudi pipeline attack and Houthi gains squeeze exports

IEA cuts 2026 supply forecast, pushes Middle East recovery to 2027

Oil futures jumped in early European trading Monday as traders absorbed a double hit to Middle East crude supply: a drone attack that has shut Saudi Arabia’s East-West Pipeline and a Houthi push along the Bab al-Mandab Strait that raises risks for Red Sea shipping. Front-month Brent crude climbed 2.9% to $107.68 a barrel, while West Texas Intermediate gained 2.8% to $102.88. Both benchmarks closed last week sharply higher, with Brent up 8.7% and WTI up 9.4%.

Saudi Arabia’s East-West Pipeline remained offline Monday after multiple drone attacks last week, which the Saudi Foreign Ministry said Saturday caused injuries and damage. The pipeline carries crude from the kingdom’s oil-producing east to the Red Sea coast, providing an important alternative export route while shipping through the Strait of Hormuz remains constrained. With the pipeline out of service, Saudi crude flows are more reliant on eastern Gulf terminals already under pressure from the broader U.S.-Iran conflict.

The same week, Iran-backed Houthi militants seized Perim Island and the coastal town of Dhubab after capturing Mokha, tightening their grip on the Bab al-Mandab Strait and raising risks around Red Sea crude shipments. The attack adds more pressure on a vital energy corridor in the region.

Kamco Invest said constrained shipping routes and low refined-product inventories have left oil markets particularly vulnerable to further geopolitical shocks. The firm noted that buyers in China and Singapore are now sourcing crude from as far away as Latin America and West Africa, while South Korean refined products are taking longer routes to Europe as traditional trade patterns are disrupted.

The International Energy Agency on Friday cut its outlook for global oil supply sharply, citing the continuing U.S.-Iran diplomatic impasse and renewed attacks in the Gulf and Bab al-Mandeb. The agency now expects global oil supply to fall by 5.7 million barrels a day this year to an average of 100.7 million barrels a day — a 1.3 million-barrel-a-day downgrade from its previous forecast. A full recovery in Middle East supplies, the IEA said, has been pushed into 2027.

The IEA also marked down its demand outlook. Global oil consumption is now expected to fall by 2.5 million barrels a day in 2026, a 940,000-barrel-a-day downgrade from the agency’s projection a month earlier, before rebounding by 2.6 million barrels a day in 2027.

The Organization of Petroleum Exporting Countries took a less pessimistic line, forecasting global oil-demand growth of around 400,000 barrels a day this year and accelerating to roughly 2.4 million barrels a day in 2027. OPEC said earlier this month it would keep planned October production levels unchanged, citing its commitment to market stability.

With a Saudi pipeline providing an alternative to Hormuz shipping now offline and Houthi forces tightening their grip on the Bab al-Mandab Strait, the corridors available for moving Middle Eastern crude to global buyers have narrowed. The IEA says the continuing U.S.-Iran diplomatic impasse and renewed attacks in the Gulf and Bab al-Mandeb have pushed the prospect of a normalization in oil flows into next year, leaving traders to price in a more prolonged disruption.